(This is an excerpt from an article I originally published on Seeking Alpha on November 24, 2014. Click here to read the entire piece.)
Nine months ago I wrote a piece describing the investment/trading opportunity in cocoa with a focus on iPath DJ-UBS Cocoa TR Sub-Idx ETN (NIB); iPath Pure Beta Cocoa ETN (CHOC) has extremely low trading volume. It took another two months for a dip to materialize but by then, NIB was no longer a high priority for me. It was a bad miss as the ETN proceeded to rally from there about 19% to its peak of the year in September.
Source: FreeStockCharts.com
With NIB now down about 18% from its 2014 peak, along comes another article motivating me to action: {snip}
Instead of reviewing the article in detail, I turn to the latest monthly review of the market from the International Cocoa Organization (ICCO) (for October, 2014).
{snip}
Currency fluctuations and shifts in the weather are not fundamental, lasting drivers of price, so I think it is OK to fall back on all the longer-term drivers that can drive production deficits into the future. As a reminder from my last piece:
{snip}
These are VERY attractive demand fundamentals because they are strong, persistent, and not likely to change anytime soon. Production is the big wildcard. So when temporary factors drive cocoa prices down, like now, I think it is time to buy. I bought NIB this past week; this time choosing to act immediately on my thesis. I am prepared to add some more if prices take another tumble.
{snip}
Be careful out there!
Full disclosure: long NIB
(This is an excerpt from an article I originally published on Seeking Alpha on November 24, 2014. Click here to read the entire piece.)