DOW JONES NEWSWIRES
U.S. cocoa futures fell Tuesday, pressured by follow-through speculative selling that took the lead December contract to a one-month low and the market to an oversold technical condition.
December cocoa lost $73, or 2.3%, to settle at $3,089 a metric ton on ICE Futures U.S.
Prices may be low enough, however, for some corrective buying.
"I would not be surprised to see a little bit of buying to work off this oversold condition," said Spencer Patton, chief executive officer at Steel Vine Investments in Chicago.
December cocoa hit a one-month low of $3,055 a ton during the session, when speculative selling uncovered preprogrammed sell stops. Key support at $3,050 a ton held firm, however, with further support uncovered at the Oct. 5 low of $2,967 and the Sept. 16 low of $2,920 a ton.
A close below $3,050 would confirm the recent bear trend and would likely bring more sellers to the market, said Jimmy
Tintle, broker/analyst with TransWorld Futures in Tampa. In that event, bearish traders would likely target $3,000 on the downside.
London cocoa also fell, pressured by the losses in New York and a firming of the U.S. dollar versus sterling.
Decreased concern over the Ivory Coast crop, with bean arrivals estimated up 85% over last year are having a bearish effect on the futures market, along with reports of weak demand from grinders, analysts said.
Kraft Foods Inc. (KFT) on Monday made a $16.28 billion hostile takeover bid for Cadbury PLC (CBY, CBRY.LN), but refused to budge from an initial offer, locking the two companies in a battle for control. As expected, Cadbury quickly rejected the hostile bid.
While Kraft's takeover bid may not have a direct effect on cocoa futures, traders are closely watching the developments since it is such a large deal, said Tintle.
Traders continue to roll positions out of December and into the March and May positions ahead of the contract's first notice day on Nov. 16.
Open interest in cocoa continues to decline and fell 4,947 to total 130,680 lots after Monday's close, ICE reported.
Futures volume is pegged at 27,000 lots, with 397 calls and 98 put options traded.
ICE Change Range
Dec $3,089 dn 73 3,055 - 3,178
Mar $3,140 dn 74 3,102 - 3,228
* ICE settlements in dollars per metric ton.
-By Tom Sellen, Dow Jones Newswires; 913-322-5177; tom.sellen@dowjones.com
(END) Dow Jones Newswires
11-10-09 1344ET
Copyright (c) 2009 Dow Jones & Company, Inc.
