Over the past year, orange juice futures have roughly doubled, and could rise some more as the US Department of Agriculture (USDA) in February cut its forecast for the US orange crop following a series of winter storms and frosts in Florida.
In the same report, USDA also trimmed its forecast of the juice yield Florida producers would reap per box of oranges processed. Florida is the world’s biggest grower after Brazil, and the state’s coldest December on record already sent OJ futures surging 3.1% in January, following a 9.6% gain in December, on supply concerns.
However, this recent run-up seems to have rendered OJ a double-top formation (see monthly chart), which is a bearish signal in technical analysis.
So, here is a low-cost and low-risk trade setup for a potential quick profit – come in and short when the price approaches $200, and put a stop at just above the previous top around $206.
Trade Long and Prosper!