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Cotton futures ended higher on Friday on speculative buying taking direction from other commodities and dollar weakness. The market also received support from talk of dry, hot weather in Texas, which is expected to plant more than half of all US cotton in the 2008-09 marketing year (August/July). Separately, the trade is now looking towards the US Agriculture Department’s monthly supply/demand report on Tuesday and then the USDA’s annual plantings report on Jun e 30.

Active December cotton futures contract bounced from recent lows and shows promise to edge higher gradually.

Important resistance is at 78 cents being a trend line resistance point. Break and close above 78 cents should pave the way for the next resistance at 81.50 cents. Ideally, cotton futures could get stalled here, and find it difficult to rally further.

Supports will now be seen at 72.85 cents followed by 71.74 cents. However, an unexpected fall below 71.75 cents could open the downside again, which we do not favour. The big picture counts still are giving mixed signals and would, therefore, prefer to watch the prices for more clues. Indicators are displaying a neutral picture.

The RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator, indicating a bearish reversal. Therefore, look for cotton futures to test the resistance levels.

Supports are at 72.85, 71.75 & 69.50 cents and resistances are at 75.95, 78 & 80.50 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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