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New York cotton futures ended higher Friday on speculative and option related buying. Overall strength in commodities is also underpinning cotton futures. Cotton market participants are also taking into account talks that India and Pakistan may have a smaller cotton crop than projected by the US Department of Agriculture. This would lead the countries to import more cotton and export less to China, a deficit that could be filled by US cotton. In the US, freezing temperatur es in northwestern Texas are not believed to have damaged the crop. New crop condition data will be released Monday afternoon by the USDA.

The active contract rose higher after the support levels were tested. As expected important support in the 62.35/50 cents held well. As long as 60.75 cents holds any attempts to fall lower, we believe the underlying medium-term trend looks strong and set to test 70 cents at least or even higher. Crucial support is now at 59.50 cents and as long this level holds, we will stick to our bullish view for cotton futures in the months to come. 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. There is a minor trend line resistance at 66.75 cents. 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 consolidate and rise higher.

Supports are, at 63.45, 62.50 and 60.75 cents. Resistances at 65.65, 66.75 and 68.25 cents respectively.

Gnanasekhar 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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