The Hindu Business Line : Bearishness intact in cotton

NY Cotton futures ended fell lower on speculative selling on Friday amid low volumes despite a good rally in the grains complex. Weather in the growing area of Texas has been keeping market participants on their toes. Markets are now looking forward to the release next Wednesday of the US Agriculture Department’s September crop production and supply/demand reports for potential price direction. Recent reports suggest China’s crop last year was larger than origi nally thought and upward adjustments could be seen to last year’s and the current crop.

The active contract fell lower against our expectations. As mentioned in the previous updates, moves to 61-61.50 cents looked likely and it has also been a good resistance point to surpass. Ideally a gap in the 58-59 cents zone should be filled on its way down and then we can expect a gradual rise again towards 63-65 cents. Favoured view expects either a consolidation in the 58-63 cents range followed by a rise towards 66.50/70 cents, or a direct rise towards 66.50 cents. As we have been maintaining, a re-test of 70 cents seen in 2004 is on the cards. The bigger picture looks bullish and is set to scale new peaks after prices broke above the 60 cents range convincingly. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages, in MACD are still below the zero line indicating bearishness. Only a cross-over of the averages above w the zero line again will now indicate a bearishness. Therefore, look for cotton futures to test the resistance levels.

Supports are, at 59.80, 59.10 and 58.75 cents. Resistances at, 61.75, 63 and 64.50 cents respectively.

Gnanasekar T.

(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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