The Hindu Business Line : Cotton futures may test resistance

New York cotton futures rose sharply higher on fears of persisting drought conditions surrounding the US cotton crop. Cotton futures are expected to be buoyed and find good support on declines in the coming weeks.

The active December contract bounced higher in line with our expectations.

As expected, prices rose higher after bouncing from near supports at 51.10 cents levels.

Dips to 53.40 cents should offer good support in the coming week.

Only a 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 neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD have gone below the zero line in the indicator suggesting bearishness.

Only a crossover of the averages above the zero line again will indicate bullishness. Current prices are below the short-term average of 8-day EMA at 54.05 cents indicating bullishness and the 34-day EMA is at 53.95 cents.

Therefore, look for cotton futures to rise higher and test the resistance levels. Supports are at 53.40, 52.75 and 51.20c. Resistances are at 56.90, 57.75 and 58.25 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. T

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