Cocoa failed to make a new high but on the weekly basis, it appears to be forming an ascending triangle pattern, which is a continuation pattern.
The recent failure is not a sign of reversal but only a minor pullback after a strong breakout above the ST resistance trend line last week.
This breakout could signal the end of the sideways movement and the next leg up could be underway.
A move above 3395 would confirm that the bull is coming back. The upside targets are at 3533 and 3625, which are the 138%FR and 136%FR levels.
A drop below 3187 would negate our bullish view.
Besides that, on the fundamental side, we could see a shortage of supply in the coming months given that the El Nino is happening now.
This supply deficit could push prices higher too.
Therefore, in our opinion, with both technical and fundamental pointing towards a more bullish outlook, we could see higher prices in the next couple of months.
Watchout on both 3395 and 3187 key levels. (Read Report)