My cousin wasn't asking me about crypto during this year's Thanksgiving feast.
Instead, he wanted to know which commodity to buy after the historic cocoa trade.
Without hesitation, I told him, "coffee."
And I really believe that!
Let's talk about why.
Our Soft Commodity Index is testing a critical level of interest:
The index peaked and rolled over in 2011 and has carved out a massive basing pattern in the years since then. If and when the bulls resolve this pattern, we want to be long.
On a relative basis, soft commodities are printing fresh 52-week highs versus the broader commodity complex. This is precisely what we're looking for in a leadership group, and we expect this outperformance to continue for the foreseeable future.
Cocoa futures recently resolved a 45-year base and put the bears in a dirt nap, and we think coffee futures are up next:
As you can see, coffee is at its highest level since it peaked in 1977, following a face-ripping 600% rally in two years.
A close above 340 would mark the end of a nearly 50-year consolidation and the beginning of a new uptrend.
And we suspect this uptrend will be one for the history books. We've already seen a historic rally in cocoa. Why not coffee?
The 14-day RSI, shown in the lower pane, has confirmed this rally with the highest momentum reading since 2014. You tend to see blowout momentum readings closer to the beginning of uptrends, not toward the end.
And while it would be healthy to digest some gains over the short-term, the long-term trend points higher.
We want to increase our coffee exposure on a breakout above 334, with a target of 452 over the coming 3-6 months.
For those looking to trade coffee over longer timeframes, we're looking at 524 and 823 as potential levels of interest.
