Commodity Trader's Almanac 2O11

72

AUGUST GIVES

COFFEE A LIFT

Coffee has increased in popularity on an interna-

tional scale in the last few decades. Most con-

sumption had been from the United States, parts

of Europe, and Canada. Many Europeans have

switched from tea to coffee, and with the intro-

duction in late 2005 of Starbucks coffee in

Europe and in Asia, more and more people are

consuming “Vente Lattés.”

Demand is improving, especially for higher

grade and quality coffee. With increasing global

consumption habits, if there are threats of supply

disruptions or production declines for higher

grade coffee, the futures market can be prone to

extreme price moves.

Coffee typically tends to start a seasonal bot-

toming process before distributors begin buying

ahead of anticipated demand in the upcoming cold

winter months. This is the time to cover the best

seasonal trade short position from May on or about

August 9. It is also a time to look for a short term

trade opportunity from the buy side. Traders

should look to enter a new long position on or

about August 16 and hold this position until about

September 2. This trade usually falls right around

Labor Day. However, this was not the case in 2009,

but once again we would like to point out that if

one uses technical indicators to help time your

entry, it may have kept traders from entering this

trade until early September or from entering at all.

This trade has worked 24 times in the last

36 years, for a success rate of 66.7%. The

chart below shows the way the market traded in

2009–2010 along with Green Mountain Coffee

Roasters (GMCR) as well as the 36-year average

seasonal trading pattern. See pages 133–138 for

additional correlated trades.

ENTRY EXIT PROFIT/

YEAR DATE CLOSE DATE CLOSE LOSS

1974 8/16 56.25 9/05 55.60 –$244

1975 8/18 85.73 9/05 81.35 –1,643

1976 8/17 153.75 9/03 153.85 37

1977 8/16 193.50 9/02 183.81

–3,634

1978 8/16 128.50 9/05 150.38 8,205

1979 8/16 195.50 9/05 208.09 4,721

1980 8/18 154.16 9/05 135.34

–7,058

1981 8/18 114.57 9/04 107.29 –2,730

1982 8/17 125.70 9/03 126.95 469

1983 8/16 129.45 9/02 130.37 345

1984 8/16 142.25 9/05 144.80 956

1985 8/16 138.70 9/05 136.75

–731

1986 8/18 180.93 9/05 203.32 8,396

1987 8/18 106.25 9/04 116.80 3,956

1988 8/16 120.69 9/02 123.17 930

1989 8/16 79.26 9/05 83.45 1,571

1990 8/16 98.20 9/05 103.70 2,063

1991 8/16 82.75 9/05 90.20 2,794

1992 8/18 53.20 9/04 54.50 487

1993 8/17 74.00 9/03 76.25 844

1994 8/16 197.00 9/02 209.90 4,838

1995 8/16 146.35 9/05 149.10 1,031

1996 8/16 111.55 9/05 111.60 19

1997 8/18 162.95 9/05 188.85 9,713

1998 8/18 113.00 9/04 112.85

–56

1999 8/17 92.40 9/03 92.30 –38

2000 8/16 82.90 9/05 78.50 –1,650

2001 8/16 52.85 9/05 52.10 –281

2002 8/16 50.35 9/05 56.70 2,381

2003 8/18 62.25 9/05 66.35 1,538

2004 8/17 72.45 9/03 72.20

–94

2005 8/16 101.45 9/02 103.05 600

2006 8/16 108.60 9/05 110.30 638

2007 8/16 115.25 9/05 116.05 300

2008 8/18 137.95 9/05 142.65 1,763

2009 8/18 128.25 9/04 124.10

–1,556

36-Year Gain $38,880

AUGUST LONG COFFEE (DECEMBER)

TRADING DAY: 12—HOLD: 13 DAYS

Chart courtesy TradeNavigator.com

COFFEE (KC) BARS AND GREEN MOUNTAIN COFFEE ROASTERS (GMCR) CLOSES

(WEEKLY DATA JANUARY 2009–MAY 2010)

Coffee Seasonal Pattern since 1973

c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 72

MONDAY

25

TUESDAY

26

WEDNESDAY

27

THURSDAY

28

FRIDAY

29

SATURDAY

30

SUNDAY

31

People become attached to their burdens sometimes more than the burdens are attached to them.

— George Bernard Shaw (Irish dramatist, 1856–1950)

Technology has no respect for tradition.

— Peter C. Lee (Merchants’ Exchange CEO, quoted in Stocks, Futures & Options magazine, May 2003)

All the features and achievements of modern civilization are, directly or indirectly, the products of the capitalist process.

— Joseph A. Schumpeter (Austrian-American economist, Theory of Economic Development, 1883–1950)

To achieve satisfactory investment results is easier than most people realize.

The typical individual investor has a great advantage over the large institutions.

— Benjamin Graham (Economist, investor, Securities Analysis 1934, The Intelligent Investor 1949, 1894–1976)

The heights by great men reached and kept, were not attained by sudden flight,

but they, while their companions slept, were toiling upward in the night.

— Henry Wadsworth Longfellow (Educator and poet, 1807–1882)

Start Long Natural Gas(X)—60.0% Accuracy Since 1990—End Oct. 21—Page 68

End Short S&P 500(U) (Jul. 15)

Start Short Cocoa(Z)—67.6% Accuracy Since 1973—End Nov. 3—Page 127

End Short Soybeans(U) (Jun. 7)

JULY

OE:

NG(Q), HG(Q), GC(Q)

LT:

NG(Q), HG(N), SI(N)

FN:

NG(Q)

FN:

HG(Q), GC(Q), S(Q)

c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 73