The Hindu Business Line : NY cotton may test support level

New York cotton futures ended lower on speculative selling with more liquidation by funds and weakness in other commodity markets pushing fibere contracts lower.

The Active July contract moved sharply lower against our expectations. Prices breached the important support at 50-50.70 cents triggering stops and follow-through selling is expected to continue into next week. As seen in the chart above prices have also broken the important long-term trend line support point at 50.10 cents.

Potential near-term targets are at 48.50 cents followed by 47.08 cents. Elliot wave analysis points to a corrective pattern in progress, ending at 41.71c and a new impulse still in progress. The corrective second wave of that impulse looks to have ended at 46.10 cents. A move above 58 cents will confirm the beginning of the third wave move.

However, a fall below 45 cents will alter the wave counts and put cotton futures in the bearish path, which we do not favour at this point. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages, in MACD are below the zero line in the indicator suggesting a bearish reversal. Only a crossover of the averages above the zero line will indicate clear bullishness. Current prices are below the short-term average of 8-day EMA at 50.59 cents and the 34-day EMA is at 51.74 cents. Therefore, look for cotton futures to test the support levels in the coming week.

Supports are at 48.65, 47.85 and 46.12 cents. Resistances are at 50.10, 51.35 and 53.10 cents respectively.

(The author is the Director of Commtrendz Research and also 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.)

Gnanasekar T.

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