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Cotton futures ended slightly lower on Friday on profit-taking as the market extended its pullback after its recent rally prices may drift in a range while waiting for leads from an industry conference and a crop report next week. The market may wait for some leads from the annual Beltwide cotton conference getting started on Wednesday in Nashville, Tennessee, the American Farm Bureau meeting running from January 13 to 16 and the monthly supply/demand report from the US Ag riculture Department next Friday. Meanwhile, Pakistan’s raw cotton imports jumped 107 per cent to 1.35 million bales in the first five months of the 2007-08 fiscal year to November.

Active March cotton futures contract rose higher in line with our expectations. Important resistance is at 68.95 cents a long-term trend line resistance point in the coming sessions. A corrective dip to 67 or even lower towards 66 cents can be expected in the coming week.

Direct rise above 68.95 cents can see cotton future possibly target 75 cents on the upside. Crucial support is at 66.75 cents and as long as 64 cents remains undisturbed, we can expect prices to continue rising higher.

Our favoured view expects cotton futures to find supports at the above mentioned levels, failing which we could visit the 58-60 cents zone again and then resume the climb higher again.

This zone is also the breakout point which spurred a huge rally in cotton futures past three months. Elliot wave counts indicate a third wave impulse in progress.

After this correction ends, we can expect the impulse to continue higher. Indicators are displaying a neutral picture. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator indicating bullishness to be intact. Therefore, look for cotton futures to rise higher.

Supports are at 66.75, 64 & 61 cents and resistances are at 68.10, 69.85 & 72 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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