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Cotton futures ended higher on Friday as wide-scale liquidation from ongoing economic uncertainty was exacerbated by the rallying dollar and a bearish USDA report. The report pegged the US cotton exports in 2008-09 at 13 million bales, an aggressive cut from the 14.5-million bales estimate last month. Projections for world cotton consumption were also pared to 36.14 million bales from 38.51 million bales amid lower consumer textile use in the weakening world economic outlo ok. The pressure piled on cotton futures is unlikely to abate unless economies recover from this financial shock.

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 has gone much below our anticipated target at 57c. Further lows towards 44 cents or even lower cannot be ruled out. Good resistance will now be seen at 52-54 cents being a trend line resistance point zone. Further resistance is at 58c now. As mentioned earlier, the big picture has turned bearish and only weekly close above 58c will now strengthen the view for a possible reversal upwards. Indicators are neutral picture now. RSI is in the highly oversold zone indicating a possibility of a pullback in the offing. However, the averages in MACD are 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 initially and then pullback higher.

Supports are at 48.50, 46.75 and 44c and resistances are at 52.25, 54.40 and 56 cents respectively.

Gnanasekaar 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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