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New York cotton futures ended lower Friday on speculative selling and lack of trade buying. Rollover and switching into March has been dominating the previous week.

Markets are expecting availability of cotton to be lower on the back of reduced acreage and increasing demand. However, till the end of 2007, cotton futures are expected to be range bound with no clear direction. The weekly US export sales released on Friday by the US Department of Agriculture totaled 1,59,400 running bales, at the low end of expectations.

The active contract rose higher in line with our overall expectations. As we have been maintaining, a re-test of 70 cents seen in 2004 is on the cards.

However, it failed to take a shy at the important resistance at 70 cents, which we have been targeting for so long. Favoured view still expects 64.50-65 cents holding well for a rise towards the important resistance at 70 cents.

Nevertheless, short-term price structures suggest a fall below 63 cents ending the current uptrend.

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 resistance at 69.45 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 66.05, 65.25 and 63.50 cents. Resistances at, 67.90, 68.25 and 69.45 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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