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Cotton futures ended lower on Friday due to speculative selling linked to weakness in other commodities and overall weakness in economies. A lack of bullish news and worries about global economic turmoil crimping demand also pressured prices. In September, the US Department of Agriculture raised its production estimate to 13.85 million bales from 13.77 million bales, and lifted the average yield to 849 from 842 pounds per acre. The USDA is scheduled to issue its next crop report on October 10.

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 57 cents. Further lows towards 54 cents cannot be ruled out. As expected resistances at 64-65 cents was quite strong being a trend line resistance point zone. Further resistance is at 67 cents now. As mentioned earlier, the big picture has turned bearish and only a 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 fall lower.

Supports are at 60.15, 59.45 & 57c and resistances are at 62.50, 63.25, & 65.40 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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