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Cotton futures ended higher on Friday as spill over and weather concerns boosted prices, though bearish sentiments minimised gains. Futures rose in early trade amid support from commodities strength and the weaker US dollar before prices jumped on the release of the September US Department of Agriculture crop production and supply and demand report.

The market rallied in response to bullish reports for grains. The US Department of Agriculture on Friday decreased the US cotton exports and lowered world cotton consumption, a reflection of global economic situations.

The USDA also lowered world cotton consumption to 123.70 million bales from 124.54 million in the last report.

Active December cotton futures found good support at 63 cents and are showing some bottoming signs. Only a break below 64 cents again could turn the picture bearish for cotton futures. Such a break lower has the potential to test 57c or even lower towards 54 cents.

Good resistance will now be seen at 67 cents being a trend line resistance point zone. Further resistance is at 70.50c now. As mentioned earlier, though the big picture has turned bearish, there is still a possibility of prices getting supported at the 63-65c zone and rising higher from there. Indicators are displaying a bullish picture. RSI is in the neutral zone and indicating a positive divergence.

However, the averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Only a cross over above the zero line again could signal a clear bullish reversal. Therefore, look for cotton futures to rise higher.

Supports are at 64,63 & 62.50c and resistances are at 66.25, 67.40 & 70.53 cents respectively.

(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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