The cup that will cheer

COMMODITY WATCH

Coffee could rise another 60 per cent from the current levels.

Although he never took an economics course, Princeton psychologist Daniel Kahneman received the Nobel Prize in economic sciences in 2002.

Kahneman's life-long work integrated psychological research and economic science. His work showed economists how people don't always make reasoned choices. Kahneman calls it 'The Quirkiness of Human Judgment'.

'Sell high and buy low' sums this mood partially. Nobody wants to buy at a market bottom, everybody wants to buy at a top. The quirky human does not reason, is impatient, and herds. We at Or-phe-us are taking Kahneman's hypothesis further. We say that not only does the majority of us behave like dumb sheep (irrationally), our behaviour as a group is a fractal.

This means that whether we are talking about intra-day traders, weekly traders, monthly or yearly investors, as a group our behaviour has a form, a form defined by Fibonacci sequence. And talk about anything, climate, politics, or coffee the decisions to vote or not, buy or sell are polarised by a pattern and the Fibonacci sequence.

For example, coffee is undergoing an accumulation pattern for the last eight years (a Fibonacci number). And has retraced nearly 61.8 per cent (Fibonacci Golden Ratio) of the previous fall. In the coming months, it should find support at the eight-year resistance and push up to a new high above 180 cents per pound in a five wave impulse form.

We remain soft (coffee, sugar, cocoa) bulls. We initiated our coverage on coffee on October 3, 2006. Coffee just like sugar ended its multi decade supercycle bear IV wave in July 2002. The commodity is in a multi-year bull market.

Currently, coffee seems to be moving in a IV primary circle. And is now churning up the final (E) intermediate wave of the triangle back to sub 100 cent levels.

After this move down, the thrust up to 180 cents should begin. And after it breaks out, the news will arrive, maybe 13 months late (like it did in case of wheat) that coffee was one of the best performing commodities of 2007. And you know, what will happen then? Everybody will 'Buy'. Quirky, isn't it?

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Contributed by or-phe-us.com, a global alternative research company.