The Hindu Business Line : Cotton futures may consolidate, rise

New York cotton futures ended marginally higher on Friday as the markets moved in a narrow range waiting for further clues on markets direction. Market participants will keenly look forward to planting intentions report from the National Cotton council.

Commodities like grains and soyabeans, are expected to be planted more, in light of strength seen those commodities in 2007.

The USDA's weekly export sales report showed total US cotton sales at 271,700 running bales (RBs, 500-lbs each), from 41,900 RBs last week.

The active March contract is consolidating and preparing itself for the next move. Any dips to 53.50-75 cents will find good support in the coming sessions being a trend line support point. We still believe we can expect a test of 60 cents, which will be a strong resistance to cross.

A daily close above 56.50 cents will indicate bullish strength, leading prices higher towards 57.70 cents followed by the psychological resistance at 60 cents. In the big picture, Elliot wave analysis still points to a corrective pattern in progress and a break above 60.52 cents will give rise to a new impulse. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages, in MACD have gone above the zero line in the indicator suggesting bullishness to be intact. Only a crossover of the averages below the zero line again will now indicate a bearish reversal. Current prices are above the short-term average of 8-day EMA at 54.60 cents indicating bullishness and the 34-day EMA is at 54.45 cents. Therefore, look for cotton futures to consolidate and rise higher.

Supports are at 53.56, 52.50 and 51.85 cents. Resistances are at 55.40, 56.10 and 57.35 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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