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Gnanasekar. T

New York cotton futures ended lower on Friday sparked by a bearish Government data on demand/supply. Earlier this week, fund buying boosted the benchmark contract to highs last seen in mid-June.

The active December contract rose higher as expected. Any dips to 54.50-55 cents should offer good support in the coming week being a trend line support point.

The bigger picture for cotton futures looks quite favorable for a test of 60 cents or even higher to 68 cents on positive momentum.

However, we could see the markets moving in a range before it breaks out higher. 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.

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 are below the zero line in the indicator suggesting bearishness.

Only a crossover of the averages below the zero line again will indicate bearishness. Current prices are below the short-term average of 8-day EMA at 56.36 cents and the 34-day EMA is at 55.32 cents.

Therefore, look for cotton futures to test the support levels in the coming week.

Supports are at 54.45, 53.40 and 52.70 cents. Resistances are at 56.60, 57.25 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_thiagarajan@yahoo.com.)

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