Orange Juice Set for Near-Term Rally

The Frozen Concentrated Orange Juice (FCOJ) futures have been trading sideways for since last winter’s Polar Vortex spooked the market. What we’ve seen since has simply been a range bound, unexciting market to which, I say, “Thank you!” Trading for a living isn’t about excitement. It’s about making an easy living in the toughest way possible. Therefore, when a trade sets up with our methodology in a low volatility environment, I can be reasonably sure that even if I’m wrong, it will be manageable. Today’s orange juice trade combines our Commitment of Traders (COT) Buy signal along with some late winter seasonal analysis from Moore Research.

The chart below displays our unique COT layout. We need three things to make this work. First, commercial trader momentum must be positive when looking for a buy signal. It turned positive this week. Second, the daily market must become oversold on a short-term momentum basis which it did heading into Friday, February 6th. Finally, the market needs to bounce which it did yesterday. The bounce is not only our trigger but also provides the protective stop point for our long entry.

fcoj cot chart
The Commitment of Traders (COT) program doesn’t trade very frequently but does do a good job of catching meaningful market turns.

Putting these three pieces together allows us to have bought into a decline in prices as a value priced long entry and provided a protective stop point of Thursday’s low of 135.15.

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Moving to the seasonal analysis by Moore Research, we can see that there is a late winter fear factor still built into the orange juice futures which we’ve highlighted on their chart. This fear quickly subsides as the Florida spring weather takes over.

orange juice seasonal behavior
Capturing the late winter fear premium in the frozen concentrated orange juice futures’ seasonality.

As you can see from combining these charts, this is not a home run or hold forever trade. I do expect the market’s next move to be a test of the resistance at 150. Any potential weather concerns could easily push through the tight resistance at 155. However, due to the multi-year build up of resistance around $160, I would be a profit taker if not an outright seller at those levels.

 


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