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Cocoa Futures: All You Need Is Basics
How much Elliott wave analysis do you need to know to make basic price forecasts?
If you've been reading Free Updates articles at elliottwave.com for a while, you've probably heard us say that at its core, Elliott wave analysis is simple. All you have to do is take your favorite market's chart and look for five-wave, non-overlapping moves followed by three-wave overlapping ones.
This diagram shows a basic Elliott wave picture (in a bull market; in a bear market, flip it upside down):
There is a reason why those five and three-wave moves are so important. Five-wave moves point in the direction of the trend, while three-wave moves are corrections that serve as a pause in the trend.
Now, there is a lot more that goes into a complete and thorough Elliott wave analysis, but to get started with Elliott, you really don't need to know any more than this. These basics work – just ask Elliott Wave International's Senior Commodities Analyst, Jeffrey Kennedy. In tonight's issue of his Daily Futures Junctures (April 9), Jeffrey applies this very same, basic model to Cocoa futures.
"In Cocoa," writes Jeffrey in the April 9 DFJ," the decline from 2971 fell in five waves to 2252. This is an important event, according to the Wave Principle, because five-wave moves determine the direction of the larger trend. In other words, this five-wave selloff in Cocoa means that we still have lower to go.
"However, since the 2252 low, Cocoa prices certainly haven't traded lower. In fact, prices have essentially been range-bound between 2460 and 2217. How does this fit in with my idea for lower prices? Simple: Since the 2252 low, Cocoa has been tracing out what I believe is an Expanded Flat correction."
Translation: Now that the five-wave impulse is done in Cocoa's recent decline, the time has come for that three-wave corrective pause – which, in this case (flip the above chart upside down), should take prices higher.
Learn what shape this correction may take, how far up it may take Cocoa prices, and when that might happen online right now, via a risk-free subscription to Jeffrey's Daily Futures Junctures. (Please scroll below for details.)