After a steep decline from the September high of 3399, Cocoa traded in a volatile consolidation above the 3019 support region. This region also provided support on the earlier September decline which sparked the rally to the high. While the support held for nearly a month, it broke on October 27 with a more than 2% decline.
The break below support completes a major head and shoulders topping pattern, signaling the trend in the commodity is now down. Rallies back into the 3050 to 3100 area present shorting opportunities, while a rally back above 3200, puts the trend in question (best to step aside if possible).
Figure 1. December Cocoa (CC) Daily Chart
The downside breakout provides a number of targets or profit taking areas for short positions. 2825 is the first, followed by 2700, which are both Fibonacci extensions of the September and October moves so far. The classic and head and shoulders target also comes in just below 2700.
Seasonally Cocoa is weak at this time of year and into the first week or so of November, but then sees a resurgence to the upside through much of November and December. Keep this in mind when considering the technical outlook.