The largest exchange traded note tracking coffee futures is down more than 40% the past year but some technical analysts think the unloved commodity is overdue for a bounce.
The $24.8 million iPath Dow Jones-UBS Coffee ETN (NYSEArca: JO) is trading at the lowest level since 2010.
JO is down 50% since September, according to Gary Gordon, president of Pacific Park Financial.
“Granted, I wouldn’t expect to pay 50% less for my cup of caffeine simply because the beans are cheap. Yet I might expect some of our most beloved establishments to pass on a tiny bit of savings, if only due to price wars with competitors,” Gordon wrote. “As far as I can tell, however, none of the food giants have reduced retail coffee prices.”
Currently, the long decline in coffee prices has pushed the commodity down to key multiyear support levels, says Chris Kimble at Kimble Charting Solutions. This is a contrarian trade because bullish sentiment on coffee is at the lowest level in at least four years.