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Agri-Biz & Commodities
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Technical Analysis
Downward tweak likely in cotton
New York cotton futures ended higher on Friday on speculative buying. The demand supply data on cotton released by the USDA was seen negative, however, a strong corn and soyabean complex added strong support to close higher.
The USDA raised expectations for domestic production
to 18.15 million 480-pound bales. There are many bullish
factors for cotton futures presently. China's increase in
soy imports due to drought indicates its cotton crop may
suffer and high crude oil prices translate into higher
priced synthetics, which is friendly to cotton.
The active March contract corrected lower as expected.
A corrective fall began after the trend line resistance at
56.75-57 cents was tested. The rising trend line support
point at 54 cents has given away opening way for a fall
towards 52.50 cents in the coming week. We still believe
we can expect a test of 60 cents, which will be a strong
resistance to cross. A daily close above 56.50 cents will
indicate bullish strength, leading prices higher towards
57.70 cents followed by the psychological resistance at 60
cents.
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 bullishness to be intact. Only a
cross-over of the averages below the zero line again will
now indicate a bearish reversal. Current prices are above
the short-term average of 8-day EMA at 55.25 cents
indicating bullishness and the 34-day EMA is at 54.48
cents. Therefore, look for cotton futures to correct lower
initially and then pullback higher.
Supports are at 53.56, 52.50 and 51.85 cents. Resistances
at 55.40, 56.10 and 57.35 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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