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New York cotton futures ended lower on Friday on speculative selling ahead of a long holiday weekend. The active December contract is still trapped in a range and preparing itself for the next big move. Dips to 53.50 cents have found good support till now. Next important support is at 52.25 cents and this level should offer good support in the coming week.

The bigger picture for cotton futures still 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 between 51 to 58 cents, 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, but at the same time should not drop below 48 cents for the bullishness to remain intact.

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 a bullish reversal. Current prices are below the short-term average of 8-day EMA at 54.87 cents and the 34-day EMA is at 55.10 cents. Therefore, look for cotton futures to test the support levels in the coming week and rise higher.

Supports are at 53.40, 52.25 and 51.50 cents. Resistances are at 54.87, 55.60 and 57.25 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.)

Gnanasekar. T

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