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New York cotton futures ended marginally higher on Friday. Markets will eagerly await the key demand/supply report from USDA and more importantly, news on demand in top consumer China. Another thing to note would be the resilience of fibre contracts despite a sell-off in other commodities.

At the end of the month, USDA will release its annual potential plantings report for grains and cotton. The figure for cotton plantings is seen falling sharply after a sizzling rally in corn values, which have hit 10-year highs due to a boom in the production of corn-based ethanol.

The active May contract are higher in line with our broad expectations. Prices have been consolidating with near-term resistance seen at 54c and 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. No change in view.

As long as 51.30 cents holds any attempts to decline, we see a bullish market ahead for fibe 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 above the short-term average of 8-day EMA at 53 cents indicating bullishness and the 34-day EMA is at 53.25 cents.

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

Supports are at 52.95, 51.65 and 50.25 Resistances are at 54.05, 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.)

Gnanasekar. T

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