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New York cotton futures ended higher on Friday on trade and speculative buying helped by a sizzling rally in the grains complex.

Rally in grains prices like wheat and corn would lead to a sharp fall in US cotton sowings in 2008. US cotton plantings in 2007 amounted to 11.01 million acres, an amount representing an 18-year low.

Markets will also await the release of the next Friday’s USDA supply/demand report, which could trigger sharp moves either side.

The active contract rose higher after the support levels were tested. No change in view. 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.

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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