The Hindu Business Line : Cotton futures may rise

New York cotton futures ended sharply lower on Friday, on switch trade and weather conditions improving in the main growing area of Texas. Fundamentally, the trade will be keeping an eye on weather conditions in the key growing state of Texas, which is the top cotton producing area in the country.

The now active December contract tanked lower against our expectations. As expected resistance was quite strong near the 60 cents level being the horizontal trend line resistance point. Good support is seen at 54-55 cents, which also happens to be the important 200-day EMA tracked by market participants. Move above 56.90 cents will confirm bullishness ahead in the coming weeks.

Elliot wave analysis points to a corrective pattern in progress, ending at 41.71cents 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 seems to have indicated the beginning of the third wave move targeting 73-75 cents. RSI is in the oversold zone indicating that an upward correction is in the offing.

The averages, in MACD are above the zero line in the indicator suggesting bullishness.

Only a crossover of the averages below the zero line will indicate bearishness. Current prices are below the short-term average of 8-day EMA at 55.85 cents indicating bullishness and the 34-day EMA is at 55.01 cents. Therefore, look for cotton futures find support and rise higher.

Supports are at 53.35, 52.15 and 50.20 cents. Resistances are at 55.01, 56.50 and 57.75 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.)

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