The Hindu Business Line : Cotton futures may consolidate, rise

New York cotton futures ended higher on speculative buying as the market shrugged off a negative USDA report. Markets barely reacted to the monthly supply/demand report of the US Agriculture Department since almost all of the changes in the data were minor and largely expected.

USDA said US cotton exports were cut to 14 million (480-lb) bales from 14.5 million last month and Chinese cotton imports down to 14 million bales against 15.5 million in February.

The active May contract are higher in line with our expectations. Prices moved higher and broke the near-term resistance at 54 cents and now, 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.

Resistance will be quite strong in the 55-56 cents range also being a trend line resistance point.

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 have gone above the zero line in the indicator suggesting a bullish reversal. Only a crossover of the averages below the zero line again will now indicate bearishness. Current prices are above the short-term average of 8 -day EMA at 53.95 cents indicating bullishness and the 34-day EMA is at 53.65 cents.

Therefore, look for cotton futures to consolidate and rise higher again.

Supports are at 53.95, 52.80 and 51.65 cents. Resistances are at 55.10 , 56.50 and 57.20 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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