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Cotton futures ended mixed on Friday mostly due to switch trades as confidences remains shaky as cotton prices tanked lower sparked by speculative and investment fund liquidation. The sharp fall in cotton prices would inevitably shrink the US cotton plantings in 2009. Export sales for the week to November 6, totaled 1,34,200 running bales and were down 45 per cent from the previous week, the US Agriculture Department reported.

Cotton stocks fell 6,460 500-pound bales as of Thursday to total 9,70,453 bales.

Active December cotton futures tested the support levels in line with our expectations. A strong bounce from the lows adds to bullish hopes. Support will now be seen at 40.50-41 cents. Good resistance will now be seen at 45-46 cents being a strong near-term resistance. As expected, the big picture has turned bearish and only weekly close above 55 cents will now strengthen the view for a possible reversal upwards. As anticipated we saw good support in the 38c zone being a long-term trendline support point. RSI is in the highly oversold zone indicating a possible upward correction in the offing. It is also indicating a positive divergence, a sign of a possible bullish reversal. The averages in MACD are still 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 subsequently.

Supports are at 41.25, 40.50 and 38 cents and resistances are at 44.50, 45.65 & 47.70 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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