Technical Analysis #C-ORANGE – Strong price increase may result in lower demand

August 2, 2016

Due to the drought in Brazil and by the reduction of orange crop in the states of São Paulo and Minas Gerais, orange juice rose by 45%. An improvement in weather conditions in recent days also helped the price higher thoughw will the orange juice prices fall?

This article is originally referred from IFC Markets Technical Analysis

With the advent of warm weather in late April of the current year, orange juice rose by 45%, and since the autumn of the last year – approximately twofold. This was caused by the drought in Brazil and by the reduction of orange crop in the states of São Paulo and Minas Gerais by 15%. There has been an improvement in weather conditions in recent days. Will the orange juice prices fall?

According to the US Department of Agriculture, orange juice reserves in the United States fell to 766 million pounds in June of the current year from 772 million pounds in May. The current level is nearly 20% less than the reserves in June of the last year. In this regard, orange juice price renewed the 4-year maximum last week. We deem that no significant negative news for orange juice is observed, but a number of agricultural agencies consider it “overvalued” in comparison with other non-alcoholic beverages. Let’s consider a trade in case of the beginning of orange juice price correction.

Technical Analysis #CORANGE 20160802 Strong price increase may result in lower demand

On the daily chart Orange: The price has stopped the uptrend on D1 and is moving sideways. On Monday, it rose slightly, bouncing off from the 1st Fibonacci level, which is close to the lower boundary of the short-term neutral range. The MACD and Parabolic indicators have formed the signal to sell. The Bollinger bands have contracted a lot which means lower volatility.

The RSI indicator is close to 50 and has formed negative divergence. The bearish momentum may develop in case the orange juice falls below the 1st Fibonacci level and the Monday’s low at 174. This level may serve as an entry point. The initial stop-loss may be placed above the last fractal high and 4-year maximum, as well as the Bollinger bands and Parabolic signal at 195. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals.

Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 195 without reaching the order at 174, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Position Sell
Sell stop below 174
Stop loss above 195

Original Source: IFC Markets Technical Analysis

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