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Cotton futures ended higher Friday in line with other commodities. Confidence in trading returned to cotton on the backs of other markets and indications of financial stabilisation following recent volatility. Cotton will take cues from outside markets in the near term while the market keeps an eye on weather in West Texas. Aside from focus on the broader economic situation, cotton will be paying attention to the recent cool, wet weather in West Texas, where a chunk of the 13.85- million bales US cotton crop is planted.

Active December cotton futures tanked lower against our expectations. As mentioned in the previous update, a fall below 64 cents turned the picture bearish for cotton futures. It also hit our anticipated target at 57c. Further lows towards 54 cents cannot be ruled out. Good resistance will now be seen at 64-65 cents being a trend line resistance point zone. Further resistance is at 67c now. As mentioned earlier, the big picture has turned bearish and only weekly close above 64c will now strengthen the view for a possible reversal upwards.

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 consolidate and rise higher.

Supports are at 61.50, 60.75 & 59.45c and resistances are at 63.25, 65.40 & 66.65 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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