The Soft Commodities Make a Big Move

The pandemic has brought a multitude of supply chain disruptions reaching not only into the tech space, but also into the agricultural space.

The Invesco Agricultural Fund (DBA) recently cleared major resistance at 16.87 from the 200-week moving average, plus resistance going back from highs of 2019. Participating in the rise of agriculture has put some specific soft commodities on our watchlist, like coffee (JO) and Sugar (CANE).

The soft commodities markets are made up of perishables such as cocoa, coffee, cotton, orange juice, and sugar, which are also some of the oldest tradable commodities still around today. From a technical standpoint, both look to be on the verge of a major breakout with a huge amount of upside potential.

JO recently cleared its consolidation area around $35 to $37.

Looking at the weekly chart shows that JO has been through quite some choppy price action in the past 14 months, with $40.70 showing a major resistance level.

Switching over to a more fundamental standpoint, coffee’s main distributor is Brazil, which has its currency (Brazilian Real) consolidating around highs. An increase in the value of the Real could cause an increase in price for coffee, as it becomes more expensive to import to the U.S. With that said, fundamental reasons can be very speculative as they are tough to grasp a timeframe for. The main point is if JO breaks its current resistance, it could open the price range back to highs from 2019 around $45.60.

Moving on to the sugar chart, CANE looks to be in the same boat as DBA. It recently broke the 200-WMA and is just about to attempt a break over 2019 highs. If this uptrend continues and these key resistance points get cleared, the agriculture and soft commodity sectors could have a lot more room to grow.

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  • S&P 500 (SPY): 385 support. 394 resistance
  • Russell 2000 (IWM): 230 resistance. 217-222 support area
  • Dow (DIA): 312 support area. 314.99 10-DMA
  • Nasdaq (QQQ): Main support 318.75 the 50-DMA
  • KRE (Regional Banks): 66.04 high to clear
  • SMH (Semiconductors): Next main support the 50-DMA at 231.06
  • IYT (Transportation): All time highs
  • IBB (Biotechnology): Support the 50-DMA at 160.05
  • XRT (Retail): Needs to clear 81.46. 75.28 support

Mish Schneider

Director of Trading Research and Education

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education