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CSCE cocoa settles down, March rollovers dominate

NEW YORK: CSCE cocoa futures closed lower on Thursday, coming under pressure from liquidation in front-month March ahead of next week's first notice day, traders and brokers said.

"The technical situation remains unchanged. There obviously hasn't been anything which would spur bullish activity," Prudential Securities softs analyst Arthur Stevenson said.

"Manufacturer activity both in London and here is hardly energetic, so that deprives the market of a possible source of upside support."

March settled down $8 at $776 a tonne after trading $782-774. Benchmark May lost $5 to $805 after trading $808-$799 and the rest shed $4 to $5.

Floor traders said transactions were dominated by March-May rollover activity, with a small amount of scale-down manufacturer buying early.

"It was just liquidation of the March. That's all we had, absolutely everything was just March-May rollovers," one dealer said.

Stevenson said that bearish sentiment may have been enhanced by the latest arrivals figure of cocoa beans to Ivory Coast ports.

"The latest...figure was up slightly on the previous week. Only by about 1,000 tonnes, but nevertheless I think it's a disappointment for people who might be bullishly inclined."

"At this time of the year you would normally expect to see a slight winding down of harvesting activity, so I think that speaks for itself," he added.

One New York trader said arrivals in the week ending February 6 stood at around 72,000 tonnes, with a cumulative total for the 1999/2000 season of just over 963,000 tonnes

Open interest in March, which enters its month-long notice period on Feb. 15, decreased by 2,750 lots to 18,696 as of Feb. 9, whilst it rose by 1,442 to 35,448 lots in active May.

LIFFE nearby cocoa ended slightly down on Thursday, with spot March settling at 537 pounds a tonne, down one pound.

Technically, traders put nearby support for May at $775, with nearby resistance at $826, adding there was a small gap left open between $824-827.

"The long-range bear trend remains very much intact and just because cocoa is cheap, meaning it's at a low not seen in more than two decades, doesn't mean it can't get cheaper still," Stevenson said.

Volume was an estimated 11,851 lots against the previous official volume of 18,472 lots.

The nine-day relative strength index (RSI) of May cocoa stood at 42 at the close, compared to 49 on Wednesday.

Technicians normally believe an RSI reading of 30 or less is an indication that the market is oversold, while 70 or more is usually a sign it is overbought on a short-term basis.

The CSCE is a subsidiary of the New York Board of Trade. -Reuters