Cocoa futures are trading higher for the second day in a row, gaining around 7% today. This comes after a record single-day plunge on Monday, when cocoa price plunge around 19%. A steep sell-off on Monday also wasn't accompanied by any kind of fundamental news, and analyst see that the move was overdone. There was no news from cocoa market yesterday and today, and the ongoing rebound is seen as a correction following Monday's massive slump.
Taking a look at COCOA chart at H4 interval, we can see that low of Monday's slump was reached in the $7,000 area. This is the same zone that halted declines at the beginning of May and, as a result, a double bottom can be spotted on the chart. The neckline of this potential pattern can be found in the $9,000 area. A textbook target of this pattern suggests a possibility of a move to as high as $11,000. However, for the bullish signal to be confirmed, COCOA would first have to jump above the neckline.
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Source: xStation5
