• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Gnanasekar T.

NYCE cotton futures crashed to two week lows on speculative and local selling with stop-loss selling also contributing to the same.

A textile dispute with China and bombings in Turkey cast a negative spell over the market. Washington imposed import quotas on Chinese-made bras, knit fabrics and bathrobes this week, triggering a trade dispute between the world's largest and fifth largest trading nations.

Most of the losses in the cotton futures market came from a lack of buying support as funds got out of their long positions thereby triggering a sell off. The simmering tensions over the trade spat between China and the US, coupled with a deadly wave of bombings in Turkey, has had a negative impact and has taken the shine away from cotton futures which reached a 6 year high recently.

The export sales data came in much above expectations but did not have a major impact. The data showed that the US net upland cotton sales hit 527,000 running bales (RBs, 500-lbs each), way above trade expectations of 200,000-300,000 RBs. Sales last week stood at 448,800 RBs. Cotton Outlook on Thursday left its forecast for global cotton production largely unchanged at almost 19.95 million tonnes from 19.98 million last month but at the same time lowered its consumption estimate by 200,000 tonnes to around 20.78 million.

The active December contract continues to move lower against expectations. The correction we have been seeing in cotton futures extended lower below the important support level at 73.80c. The crucial support level at 73.80c has broken and now headed much lower. This level will prove to be a strong resistance when prices move higher again. Currently prices are close to the Fibonacci 61.8 per cent retracement support level (from 55.65c to 84.80c) and are at 66.90c. An unexpected close below this level will see a deeper correction ahead. Major support can be expected at 66.75c a fractal point.

As per Elliot wave analysis we are in a corrective leg of an impulse, which can end at the current levels after a consolidation. RSI is in oversold territory and a correction can be expected. The averages, in MACD have gone below the zero line in the indicator indicating some bearish ness in the short term. Current prices are below the short-term average of 9 day EMA at 72.52c and the 50-day EMA is also at 72.50c cents. An intersection of the two averages is quite significant as this could be a possible reversal sign. Look for prices to consolidate and test the support levels. Resistances at, 70.70, 71.50 & 72.45c. Supports at 67.50, 66.80 & 64.35c respectively.

(The author is a trader at Scotiabank and the views expressed by him are his own and not necessarily of his employer. This analysis is based on the historical price movements and there is risk of loss in trading.)

Article E-Mail :: Comment :: Syndication

Stories in this Section
Aquatic centre inaugurated

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line