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Cotton futures ended higher on Friday in thin volumes mostly due to strength in the overall commodity complex. Cotton markets will keep a close eye on the macro-economic situation for direction. The sharp fall in cotton prices would inevitably shrink the US cotton plantings in 2009. Export sales for the week to November 6, totaled 1,75,500 running bales lower than trade expectations, the US Agriculture Department reported. The US cotton export shipments hit 2,00,700 RBs, f rom 2,40,900 RBs in last week’s data.

Active December cotton futures bounced higher in line with our expectations. A strong bounce from the lows adds to bullish hopes. After a successful close above 45 cents induced technical short-covering, further highs can now be seen. Good resistance will now be seen at 49 cents being a strong near-term resistance followed by 51.30 cents. 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. RSI is in the neutral zone indicating that it is neither overbought nor oversold with a possibility to extend higher further. 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 test the resistance levels. Supports are at 46.50,45 & 43c and resistances are at 48.10, 49.20 & 51.35 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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