• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Gnanasekar T.

NYCE cotton futures ended higher mainly due to the bullish USDA cotton export sales report on Friday. The US Department of Agriculture said cotton weekly net upland sales surged to 448,800 running bales (RB), up from 275,800 RBs in last week's report, with China the biggest buyer at 231,900 RBs.

USDA said cotton shipments reached 185,900 RBs. Chinese demand for cotton is still very strong. China has been the driving force in a rally that has sent cotton prices, soaring to levels not seen since late 1995. Since the start of the 2003-04 marketing year (August-July), the Chinese have bought 2.765 million RBs of cotton from the US alone.

USDA, in its November supply-demand report, pegged Chinese cotton imports in 2003-04 at 7 million (480-lb) bales. The first notice day for the December contract was nearing and position switches to the next active contract March taking place, has also kept activity muted in the futures market this week.

The active December contract continues to move lower against expectations. The correction we have been seeing in cotton futures extended lower below the important support level at 73.80c. With the Friday's closing much above that level, should see this level being a base for a another push higher from here. The rising trend line, which was broken at 76.25c will now be the initial resistance followed by the crucial one at 78.30c from where prices gapped down.

The Fibonacci 38.2 per cent retracement support level from 55.65c to 84.80c is at 73.80c and we saw this level being breached last week. Believe support should be strong here for a move higher. An unexpected close below this level will see a deeper correction ahead.

As per Elliot wave analysis, we are in a corrective leg of an impulse third wave in progress targeting around 74.00 cents, which should end anytime now. RSI is in neutral territory suggesting it is neither overbought nor oversold. The averages, in MACD are still strongly above the zero line in the indicator. As long as the averages are above the zero line the overall up trend will sustain. Current prices are below the short-term average of 9 day EMA at 75.85c and the 50 day EMA is at 71.56 cents. Look for prices to consolidate and head higher. Resistances at, 76.25, 78.30 & 83.00c. Supports at 73, 72.50 & 71.88c respectively.

(The author is a trader at Scotiabank and the views expressed by him are his own and not necessarily of his employer. This analysis is based on the historical price movements and there is risk of loss in trading.)

Article E-Mail :: Comment :: Syndication

Stories in this Section
Good crop brings smiles back to M.P. farmers

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line