Financial Daily from THE HINDU group of publications
Monday, Mar 21, 2005
Financial Daily from THE HINDU group of publications Monday, Mar 21, 2005 |
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Agri-Biz & Commodities
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Technical Analysis Cotton futures may move down Gnanasekar T.
Part of the catalyst for a correction was provided by a Government sales report which showed that high prices were hurting US cotton sales. The US Department of Agriculture said in its weekly export sales report that US cotton sales hit 162,700 running bales (RBs, 500-lbs each), at the lower end of market expectations. Fundamentally, cotton futures are expected move northwards after the technical correction, as strong demand from a buoyant global economy and lower plantings in the upcoming 2005/06 season from countries such as the US. Higher crude prices are also seen boosting cotton prices, as the price of synthetic fibres go up, the main competitor of cotton.
Active May contract corrected lower after coming close to testing our near-term technical target at 55c. Cotton futures have been steadily moving higher without any correction past five weeks. Prices have broken below the rising channel as seen in the chart above and support will now be seen at 49.55c being the fibonnaci 38.2 per cent retracement level for the move from 41.71-54.20c. This also happens to be the 200-day EMA average point, a barometer watched by momentum based funds for signs of trend reversals. Elliot wave analysis points to a corrective A-B-C pattern, ending at 41.71c and a new impulse in progress. However, only a daily close above 55c will confirm this eventuality. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages, in MACD are still above the zero line in the indicator suggesting underlying bullishness. Only a crossover of the averages below the zero line in the indicator will suggest a bearish reversal now. Current prices are below the short-term average of the 8-day EMA at 52.08c and the 34-day EMA is at 49.48 cents. Look for prices to test the support levels and rise higher again. Supports are, at 50.60, 49.55 & 48.31c. Resistances, at 52.15, 53.80 & 55 cents respectively.
(The author is associated with the Multi Commodity Exchange of India. The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)
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