Today, February 16, 2020, a signal was found for cocoa. On the February 12 daily chart, divergence formed, a discrepancy between the histogram of the OsMA indicator and the price (indicated by red lines). This discrepancy indicates the weakness of the bulls and the growing strength of the bears. The price is testing the 2900 mark, which was previously observed in April 2018.
On the indicator Better Volumes (with parameter 12 for the day timeframe) formed on February 11 and 12 bearish volumes. The February 11 afternoon candlestick forms a classic pin bar that confirms a reversal signal. The indicator Price Deviation (with parameter 50) reached the value of 12.8%. Which indicates the overbought cocoa. Previous corrections or reversals began with a value of 9.7% of this indicator. The only subtle point is the deviation of the price from the moving average of 50.
At the moment, the price is 8.7% above the moving average of 50, divergence and pin bar confirm our theory of a short position. I prefer to set a stop loss of 2 ATP, which in this case will be 3020 for Cocoa. Another option is for the last peak at about 2910.
Therefore, the plan for trading is the following – selling at current prices (about 2886) with setting the take at 2480 and stop at 3020. The ratio of possible profit to risk is 3 to 1. Do not forget to follow the rules of risk management!