The Hindu Business Line : Upward tweak likely in cotton

NYCE cotton futures settled near a 19-week high on fund and option related buying coupled with spill over effect from soyabeans and wheat complex. There was a big rally in copper, crude oil and precious metals in 2004 and row commodities such as soyabeans, cotton, corn and wheat did not participate and are trying to catch up now.

Fundamentally, 2004 saw record crops in all the row commodities which could be the reason for not participating in the overall commodities rally. With equity and fixed income markets not expected to yield much in the coming year, row commodities could steal the show in 2005 as they are available cheap compared to other commodities which have already appreciated.

Meanwhile, the market barely budged to the US Department of Agriculture weekly sales data released on Friday. USDA reported U.S. cotton sales hit 244,000 running bales (RBs, 500-lbs each), in line with market expectations confirming the off-take on the demand side.

The active May contract rallied higher in line with our expectations. Psychological resistance at 50c has been overcome. Expect prices to continue heading higher towards the next technical target at 53.25c on follow-through buying. A break higher from the recent trading range of 41-48c was the trigger and a daily close above 46.45c the long-term falling trend line resistance indicated a bullish reversal in the offing. Support should now be seen at 48.25c and as long as 46.50c holds the downside, we can expect cotton futures to test the next important resistance level sat 58.15c.

Elliot wave analysis points towards a complex corrective structure currently under way. As mentioned earlier, we are in a corrective A-B-C pattern, which now looks to have ended at 41.71c and a new impulse in progress. However, only a daily close above 55c will confirm that. RSI is in the overbought zone now indicating a correction to take place. The averages, in MACD have gone above the zero line in the indicator suggesting bullishness. Only a crossover of the averages below the zero line in the indicator will suggest a bearish reversal now. Current prices are above the short-term average of the 8-day EMA at 47.18c and the 34-day EMA is at 45.59cents. Look for prices to test the resistance levels with intermediate corrections.

Supports at 48.25, 46.45 & 45c. Resistances, at 51.25, 53.25 & 55 cents respectively.

(The author is associated with the Multi Commodity Exchange of India. The views expressed in this column are his own and not of his employer. 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.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Onion heading for record production

Rubber dealers seek clarification on VAT

Dusts in demand at Kochi tea sale

Upward tweak likely in cotton

Speculative buying seen lifting global grain prices

Contaminated chilli powder entered UK in 2002: FSA