Business Daily from THE HINDU group of publications
Monday, Jun 04, 2007
ePaper
Business Daily from THE HINDU group of publications Monday, Jun 04, 2007 ePaper |
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Agri-Biz & Commodities
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Technical Analysis Cotton could test resistance, rise Gnanasekar T.
New York cotton futures ended lower on Friday on speculative selling and profit-booking as the market tried to consolidated the sharp gains it saw in the last couple of weeks. Market will also be waiting for a pair of key Government reports that will be handed out this month. One is the US Agriculture Department's monthly supply/demand report on June 11 and the other is the USDA's plantings data on June 29. World cotton output will drop by 1 per cent to 25.1 million tonnes in 2007/08 even as cotton consumption is forecast to increase 2.6 per cent to 26.8 million tonnes, an international farm group forecast on Friday. The active contract moved perfectly in line with our expectations. Resistance at 52 cents range has been difficult to surpass, also being a trend line resistance point. We can either see a corrective decline towards 49 cents or a consolidation in the 49-51cents range before fibre contracts resumes the climb higher again. Fall below 48 cents will neutralise bullish expectations leading prices further lower.
Our favoured view is to expect a corrective decline to 48 cents followed by a rise higher again. Positive divergence in indicators, clearly suggested a reversal to the up side. As we have been mentioning in the previous updates, 46-47 cents levels will offer good support for a retest of 57-58 cents in the weeks to come. 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. Therefore, look for cotton futures to test the support levels and rise higher again. Supports are at 50.25, 49.25 and 48.75 cents. Resistances are at 51.65, 52.78 and 53.10 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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