The Hindu Business Line : Slight fall in cotton likely

NYCE cotton futures closed slightly lower on Friday, on thin volumes as most market players stayed on the sidelines ahead of a long holiday weekend. The NYCE cotton market will be closed on Monday for the US Presidents Day holiday, reopening on Tuesday.

A stronger than expected export sales report from USDA lent support to the bearish sentiment. On Thursday, USDA said US net upland cotton sales hit 703,100 (500-lb) running bales, exceeding trade expectations for 350,000 to 600,000 RBs. Cotton shipments hitting 348,400 RBs, would enable the US to meet the USDA target of 13.2 million (480-lb) bales in exports for the 2003-04 marketing year (August/July). The latest buying spree was led by China, whose heavy purchases last year spurred cotton to highs seen since late 1995. Total Chinese purchases of US upland cotton stood at 3.684 million RBs, against 843,600 RBs at this time last year, according to USDA figures.

USDA kept its estimates of US cotton production, exports and ending stocks unchanged at 18.22 million (480-lb) bales, 13.2 million and 4.25 million bales, respectively, in the 2003-04 marketing year (August-July).

The active March contract pulled back with the underlying trend still remaining bearish. Support was seen at 64.25 cents level and a close below this level should see future prices tumble lower. As mentioned last week a head and shoulder pattern is in the making, which is a very bearish indication of prices to fall lower. The neckline point is at 64.65 cents and a weekly close below this level will confirm a bearish tone for cotton future prices in the months to come.

Near term support will be between 64-65 cents and another important support point lies at 62 cents, which is also a 61.8 per cent fibonacci retracement point for the move from 48.15 to 84.80 cents.

As discussed in our previous up date, a wave C is in progress. The move from the peak at 84.25 to 65 cents is possibly a corrective wave A and the subsequent pullback to 76.20 cents is a wave B. The current move should be a wave C targeting close to 58 cents.

RSI is back in the neutral zone indicating that it is neither overbought nor oversold. The averages, in MACD are below the zero line in the indicator convincingly indicating the bearish trend to continue.

Current prices are lower than the short-term average of 9- day EMA at 67.40 cents and the 50-day EMA is at 70.85 cents. The short-term average of 67.40 cents level should now contain any minor upside potential for cotton.

Look for prices to head lower. Resistances at 67.50, 69.25 and 70.80 cents. Supports at 66, 64.50 and 62 cents respectively.

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

More Stories on : Technical Analysis | Cotton

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Dubai investment body, NYMEX in pact for commodity exchange

Monsanto to sell wheat patent as part of cereal biz

Budget fails to answer coffee, tea subsidy issues

Rubber growers see anomaly in visual grading system

Grading of rubber

CTC teas down at Kochi auction

Slight fall in cotton likely

`AP committed to execute Pulichintala reservoir project'

Coimbatore to host national cotton meet

Poultry sector losing Rs 10 cr daily on bird flu fears

Workshop on avian flu

Pepper prices slip further

Nandan Agro sets up Swiss herbal firm