This post is a follow up from our October 29th post, December Cocoa Futures
Recent price action in March Cocoa is that of a correction lower within an overall uptrend. Expectations are for the market to continue to trace out a 3-wave (w-x-y) correction that should terminate near the 50-62% retracement of wave (1), and near the end of the previous wave 4 of one lesser degree. This zone of 2420-2460 should be viewed as a huge purchasing opportunity to add coverage.
Confidence in your decision can build if the RSI holds the bull market support line of 40 as the market traces out a 3-wave correction. IF the market falls apart and RSI (daily) establishes itself below 40, perhaps more price information is needed. However, if prices trace out the w-x-y correction as shown and RSI holds above 40, one can be extremely aggressive in adding coverage as this will be a great, high-probability entry point with very favorable risk-reward.