wmeubank@ocp.kcmo.com
IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(August 13, 1997) COCOA: In my past reports cocoa reports, I had mentioned that the late spring and summer months were know as the “silly season.” During this period it has been my experience that the market reacts in unusual ways, bucking “conventional wisdom.”
The Ivory Coast and Ghanaian crop harvests will begin next month. Early forecasts are projecting good crops in both countries. It's been my experience however that initial harvest reports have sometimes maintained the “silliness” that is common to the summer months. I suggest watching the initial reports closely and trading that information carefully. By mid-October, we should start seeing the market returning to more “orderly” trading.
Since mid-July the December contract has been trading around the $1,550 per metric ton level, in a range between $1,600 to just under $1,500. I have been mildly friendly to the market and still am. The market may have finished its move downward and may now be ready to renew its trend up.
Prior to today's activity, the market, in my opinion, was somewhat oversold, with the stochastics mixed. I believe there is considerable support from about $1,500 to $1,525 and do not expect the December contract to trade under that support near term.
Initial support is situated between $1,500 and $1,525 and initial resistance is situated between $1,550 and $1,560.
RECOMMENDATION–Here is one idea: if you feel, as I do, that the market will move higher, then you can buy an at-the- money call and sell an out-of-the-money put.
Schyler Smith
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