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Gnanasekar T.

New York cotton futures ended marginally lower after an initial boost provided by a bullish plantings report faded later. The active May contract is consolidating moved in a volatile range. A drop below 53.10 cents will be a bearish sign leading prices lower towards the trend line support point at 52.15 cents. The important resistance at 55 cents is yet to be tested. Only a break above resistance at 55-55.46 cents will trigger a sharp rise to 58 cents, followed by the psychological resistance at 60 cents.

As seen in the bigger picture chart above, a long period of consolidation will give way a sharp rise higher. 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 indicating bearishness. Only a crossover of the averages above the zero line again will now indicate a bullish reversal. Current prices are below the short-term average of 8-day EMA at 53.62 cents indicating short-term bearishness and the 34-day EMA is at 53.61 cents.

Therefore, look for cotton futures to test the support levels initially and then rise higher again.

Supports are at 53.10, 52.15 and 51.30 cents. Resistances are at 54.50, 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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