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Cocoa Elliott Wave Analysis

Function - Counter-trend

Mode - Corrective

Structure - Double Zigzag

Position - Blue wave ‘b’

Direction - Blue wave ‘b’ is still in play

Details - Cocoa found resistance at the 10,000 major level as we expected. We should see at least a 3-waves down below 8000 but preferably an impulse breakdown toward 5,000 for wave c (circled)

Cocoa Elliott Wave Analysis

After two weeks of recovery, it appears Cocoa is poised for another downturn, putting sellers in control in the short term. Despite the overall bullish long-term trend, the bearish retracement that began from the all-time high is likely to continue lower in the coming weeks.

Daily Chart Analysis:

In April 2024, Cocoa completed a long-term bullish impulse wave that began in October 2022, when it was trading at around 2198. After reaching the peak at 11732 in April 2024, Cocoa started a bearish retracement, completing a bearish impulse wave. From this peak, we expect at least a three-wave pullback, if not a larger bearish correction. Considering the path of least resistance, we will adopt a three-wave drop, labeled as waves a-b-c (circled in navy blue).

The first two legs, waves a and b, appear to have completed, with wave b finding resistance at the major level of 10,000, as shown on the H4 chart. If wave c declines from the 10,000 level, it could extend lower toward the 5,000 medium level.

H4 Chart Analysis:

The H4 chart reveals that the price broke below the trend line connecting the sub-waves of wave b (circled in navy blue), which could mark the beginning of wave c of the same degree. For confirmation, we need to see a more definitive move to the downside. The invalidation level for this bearish scenario is at 11732. A break above this level would signal the continuation of the long-term bullish impulse trend. However, current price action suggests a downward movement toward the 5,000 level in the short and medium term.

Summary:

Cocoa's recent two-week recovery appears to be a temporary pause in the larger bearish retracement that started from the all-time high. The daily chart indicates a completed long-term bullish impulse wave from October 2022 to April 2024, followed by a bearish correction. The anticipated three-wave pullback, labeled a-b-c, has waves a and b seemingly complete, with wave b facing resistance at 10,000. The H4 chart supports the start of wave c, with potential downside targets around 5,000. The key invalidation level is 11732; a break above this would negate the bearish outlook and resume the long-term bullish trend. Traders should watch for further downside movement, with a focus on the 5,000 target in the short to medium term.

Technical Analyst : Sanmi Adeagbo

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