After finding a market bottom in Q1 at $2,200 per MT, cocoa futures have been consolidating; a double bottom held, and prices rose by 10 percent. Although the fundamentals have been less inspiring with lackluster Q1 grind results, the market looks technically vulnerable to funds being drawn back in the market.
A bull channel appears to be forming ahead of midcrop, with the lower end near $2,350 and the top of the channel around $2,500 MT. Interestingly, the 200-day moving average, a technical indicator many funds follow, also lies around $2,490 per MT. A close above that level could be seen by funds as a signal to step back into cocoa and reestablish long positions.
The timing could coincide with the start of the early silly season, which could attract additional buying interest. Of course, the Ivory Coast presidential election later this year might attract even more buying interest as trade looks to insulate itself from any political fallout.