Cocoa prices are extending their recovery from the late October low, countering the sharp correction that followed the record high in April 2024. While this rebound suggests more upside potential, traders should remain cautious about the likelihood of another downward move.
Cocoa Commodity Daily Chart Analysis
Since October 2022, cocoa prices surged in a 5-wave impulse pattern, moving from 2198 to an all-time high of 11,722 in April 2024. According to Elliott Wave principles, a corrective 3-wave structure typically follows a 5-wave impulse. After reaching the 11,722 peak, cocoa prices sharply declined to 6428 between April and October 2024.
This drop completed a diagonal structure, identified as wave A of the overall corrective pattern. Based on this analysis, the correction likely forms a 5-3-5 zigzag structure. The current upward movement is wave B, unfolding in a corrective fashion. However, wave B appears incomplete, and once it concludes, wave C is expected to follow. Wave C could push prices below 6428, targeting the 5,000 region. It’s crucial to note that this wave C projection holds as long as the recovery from 6428 does not exceed 11,722 and completes as a corrective structure.
Cocoa Commodity H4 Chart Analysis
On the H4 timeframe, cocoa is advancing within wave ((a)) of B. Wave ((a)) is nearing its conclusion and will likely be followed by a wave ((b)) correction. Subsequently, another leg higher should occur in the form of wave ((c)) of B before the larger downtrend resumes. Following the completion of wave B, the downtrend from 11,722 is expected to continue, leading to the formation of wave C.
Technical Analyst: Sanmi Adeagbo
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