The Hindu Business Line : Cotton may test support level

NY cotton futures ended lower on speculative selling on Friday linked to month-end and quarter-end profit booking. Commercial selling has been strong in the week erasing gains made during the month. Weather conditions in the growing regions are expected to aid in the development of the crop adding to the bearishness. Weakness also rubbed off from the grains complex, which fell lower despite a bullish USDA crop report.

The active contract is higher in line with our expectations. Our favored view so far has been a rise towards 66.50/67c, which has materialized. Corrective signs are seen now. Important support is now at 62.50c. As long as 60.75c holds any attempts to fall lower, we believe the underlying trend looks strong and set to test 70c at least or even higher. As we have been maintaining, a re test of 70c seen in 2004 is on the cards. The bigger picture looks bullish and is set to scale new peaks after prices broke above the 60c range convincingly. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages, in MACD are above the zero line indicating bullishness now. Only a cross-over of the averages below the zero line again. Therefore, look for cotton futures to test the support levels.

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Supports are at 64.20, 62.50 and 60.75 cents. Resistances are at 65.95, 66.75 and 68.50 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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