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Cotton futures ended lower on Friday as the market gave up some gains from Thursday’s rally, amid spill-over pressure, while trade buying protected against a sharper sell-off. There is still a pressure from outside commodities markets, such as grains and energy. Cotton fundamentals are unsupportive midway into its US growing season.

The US and world cotton production is seen higher amid lower ending stocks. Meanwhile, cotton sowing in India is seen almost five down compared with last year, losing to oilseeds and rice.

Active December cotton futures found good support at 66-67 cents and are showing clear signs of rising higher towards 73-74 cents at least. Only a break below 64 cents could turn the picture bearish for cotton futures. Such a break lower has the potential to test 57 cents or even lower towards 54 cents. Good resistance will now be seen at 73-74 cents being a trend line resistance point zone. Further resistance is at 77 cents now. As mentioned earlier, though the big picture has turned bearish, there is still a possibility of prices getting supported at the 65 cents zone and rise higher from there. Indicators are displaying a bullish picture. The RSI is in the neutral zone, indicating a positive divergence. However, the averages in MACD have gone below the zero line of the indicator, indicating a bearish reversal. Only a crossover above the zero line again could signal a clear bullish reversal. Therefore, look for cotton futures to rise higher.

Supports are at 69.10, 67.50 & 65 cents and resistances are at 70.25, 72.40 & 74 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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