When it comes to commodities exchange traded products, gold, oil and silver products dominate the conversation and are usually the most heavily traded.
While gold and silver exchange traded funds are popular with buy-and-hold investors, more active traders may want to have a look at the The iPath Bloomberg Coffee Subindex Total Return ETN (NYSEArca: JO).
JO has struggled this year, falling nearly 7%, but the coffee exchange traded note (ETN) has recently shown signs of perking up. A sharp change in weather conditions in the world’s major coffee-producing countries could catch coffee bears off-guard, leading to a rebound.
Since coffee beans are priced in U.S. dollars, Brazilian farmers are selling more abroad to capitalize off the strong U.S. dollar and weak real currency. Brazil is the largest exporter of coffee beans. Coffee’s technical outlook is also improving.
“The decline over the past 6-months in JO, has it testing triple support last week at. While at this potential support zone, JO attempted to create a bullish wick (reversal pattern) last week at. Bullish sentiment towards coffee has declined along with the price over the past 6-months, to the 29% level,” according to ETF Daily News.
In the early stages of 2017 there has been ample discussion regarding the stronger dollar and the odds of the Federal Reserve boosting interest rates multiple times this year, factors that would likely hamper commodities exchange traded products. However, the dollar has been a disappointment this year and that could help JO if the ETN tries to rally in earnest.
Supporting the commodities outlook, the China, the world’s top consumer of metals, grains and energy, is seeing its economy stabilize. Moreover, the depreciating U.S. dollar has helped support demand for commodities as an alternative hard asset or a better store of wealth.
“The trend in Coffee (JO) remains down, as it has created a series of lower highs for years. One weeks reversal action does not prove that a trend reversal is in play. The first step towards proving that a trend reversal could be in play, would be an overhead breakout,” according to ETF Daily News.
For more on commodities ETFs, please visit our alternative assets category.