The Hindu Business Line : Cotton futures may test support, rise

The active December contract rose higher as expected. Important resistances have also been taken out increasing expectations of a strong bullishness ahead. Any dips to 54.50-55c should offer good support in the coming week.

As mentioned in the previous update, a positive technical pattern is in formation presently, which looks to target 58 cents at least or could even go higher towards the psychological 60 cents. 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 above the short-term average of 8-day EMA at 56.05 cents and the 34-day EMA is at 54.91 cents. Therefore, look for cotton futures to test the support levels and then rise higher.

Supports are at 54.91, 53.40 and 52.70 cents. Resistances are at 57.25, 58.25 and 60.05 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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