The Hindu Business Line : Cotton futures may rise

New York cotton futures ended marginally higher on Friday despite a largely negative data from the USDA ondemand and supply. The US Agriculture Department's monthly supply/demand report cut its estimate for US cotton exports in 2006/07 to 14.5 million (480-lb) bales from last month's 15.7 million.

It raised China's production to 30.9 million bales from 30.75 and reduced imports to 15.5 million from 16 million bales. Markets will now wait until the Lunar New Year is done to see if China, the world's biggest consumer of cotton, will book orders for the fiber.

The active March contract fell sharply lower against expectations. Corrective rallies are expected to find strong resistance in the 53.95-54.50 cents region. Only a break above resistance at 55-55.20 cents will trigger a sharp rise to 58 cents, followed by the psychological resistance at 60 cents.

As long as 51.30 cents holds any attempts to decline, we see a bullish market ahead for fibre contracts. 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 are below the zero line in the indicator suggesting bearishness. Only a crossover of the averages above the zero line again will now indicate bullish reversal again.

Current prices are below the short-term average of 8-day EMA at 53.30 cents indicating short-term bearishness and the 34-day EMA is at 54.00 cents. Therefore, look for cotton futures to rise higher and find strong resistance.

Supports are at 52.00, 51.65 and 50.25 cents. Resistances are at 53.95, 55.10 and 56.50 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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Cotton futures may rise