Financial Daily from THE HINDU group of publications
Monday, Feb 13, 2006
Financial Daily from THE HINDU group of publications Monday, Feb 13, 2006 |
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Agri-Biz & Commodities
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Technical Analysis Consolidation likely in cotton Gnanasekar T.
The US Department of Agriculture had projected US cotton plantings in 2006/07 at 14 million acres, against plantings in 2005/06 at 14.2 million acres. The main industry group National Cotton Council forecast potential US cotton plantings in the 2006/07 season at 14.44 million acres, up from 14.2 million planted in 2005/06. The US Department of Agriculture's monthly supply/demand showed 2005/06 world cotton ending stocks rising to 52.93 million (480-lb) bales, from 50.77 million last month, which is bearish for the market. This could be the reason for mild bearishness seen in cotton futures despite a robust weekly export sales data.
The USDA's weekly export sales report showed net upland cotton sales hitting a 2005/06 marketing year high at 463,200 running bales (RBs, 500-lbs each). The active March contract corrected lower after failing to follow-through higher. Supports near the 54 cents level once again held well. We can expect cotton futures now to consolidate in a range before the next move happens. We have been bullish on cotton futures for the past few months as, the bigger picture weekly charts shows a bullish triangle pattern in the making. A potential technical target falls at 68-70 cents for cotton futures in the months to come. However, psychological resistance will be noticed at the 60 cents level initially. 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. It now looks to have begun the big impulsive third wave move, which we have been expecting for a while. RSI is in the neutral zone indicating that it is neither overbought nor oversold. It is also showing a negative divergence, where prices are making a higher high not confirmed by a higher high in the indicator. The averages in MACD are above the zero line in the indicator suggesting bullishness. Current prices are below the short-term average of 8-day EMA at 56.23 cents and the 34-day EMA is at 55.47 cents. Therefore, look for cotton futures to consolidate and test the support levels. Supports are at 55.40, 54.85 & 53.20 cents. Resistances at 56.20, 57.80 & 58.25 cents respectively.
(The author is in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. 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.)
More Stories on : Technical Analysis | Cotton
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