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Cocoa: At The Top Of The 'Watch List'
Often, it's not the storm itself that sends shivers down one's spine; but rather, the calm before the storm. In that eerie space of the unknown, the sky darkens, the birds go quiet, and the air falls deathly still.
It also happens to be the only time to prepare for what's coming; to lock the doors, seal the windows, and get into a safe, secure place.
Now, imagine if there was a similarly "calm" and "quiet" spot in a financial market's price chart that portended a powerful change in trend? You could use it to safely position for that move long before the "tempest" came in and turned prices on their head.
Well -- in the world of Elliott wave analysis, there is one single pattern that does just that: a triangle. When do you know a triangle is underway? Easy; you're about to fall asleep from boredom!
A variation of this Elliott wave pattern is called a diagonal triangle. They are five-wave patterns (labeled 1 through 5), generally marked by a frustratingly long, sideways-to-higher moving trend. This trend, however, can only occur in the wave 5 position of an impulse, or wave C position of an ABC formation. Meaning: they are ending patterns that signal swift, sizable moves back to the origin of the pattern in one-third to one-half the time it takes to form. In other words: they indicate a dramatic trend change ahead.
Here, "Elliott Wave Principle -- Key to Market Behavior" provides an ideal model of the diagonal:
(A Sweet Opportunity In Cocoa: In the August 5 Daily Futures Junctures, Elliott Wave International's chief commodity expert Jeffrey Kennedy presents SIX powerful chart of Cocoa that show why now is the time to get serious. Click HERE.)
For all the reasons cited above, diagonals have always been Jeffrey Kennedy's all-time "favorite" pattern among the known 13 Elliott wave configurations. And, in the August 5 Daily Futures Junctures, Jeffrey spots not one, but two diagonal triangles underway in cocoa -- on two different time frames.
Here you can see the second of these charts (with some other Elliott wave labels erased).
In addition to a compelling Elliott wave structure, Jeffrey also observes a meaningful 8-week cycle at hand and, a clear Candlestick "Engulfing" pattern* (see editor's note below). All in all, the technical evidence strongly suggests that a fierce storm is ahead in cocoa.
(*Editor's Note: The candlestick "engulfing" pattern is featured in Jeffrey Kennedy's brand-new Technical Toolbox Video Series. In this 90-minute webinar, Jeffrey walks and talks viewers through each of his top FIVE technical analysis tools. See the bold visual and verbal narrative today via Futures Junctures Service.)