The Hindu Business Line : Cotton futures may consolidate

NEW York cotton futures rebounded higher on Friday on speculative and trade buying after cotton futures hit a one-month low on harvest pressure from the huge US crop. Disappointing export sales also contributed to this week's fall in value of cotton futures.

The active December contract corrected lower towards the support levels, as per our expectations. Good support will now be seen at 51.85 cents being the 200-day EMA level and a falling trend line support point. Prices are now expected to move in a range between 55-57 cents levels.

Near-term resistance is at the falling trend line channel resistance at 53.65 cents. As long as 51.75-85 cents support holds the downside, look for cotton futures to rise higher in the coming weeks. However, an unexpected move below the 51.54 cents, can cast doubts on our bullish view. Favoured view is to look for cotton futures to head higher after a corrective dip lower.

Elliot wave analysis points to a corrective pattern in progress, ending at 41.71 cents and a new impulse still in progress. The corrective second wave of that impulse looks to have ended at 46.10 cents.

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 bullishness to be intact. Current prices are above the short-term average of 8-day EMA at 53.78 cents and the 34-day EMA is at 53.47 cents. Therefore, look for cotton futures to consolidate and test the resistance levels.

Supports are at 51.75, 50.47 and 48.25 cents. Resistances at 53.64, 55.08 and 57 cents respectively.

(The author is associated with the Multi Commodity Exchange of India Ltd. 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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