Financial Daily from THE HINDU group of publications
Monday, Feb 20, 2006
Financial Daily from THE HINDU group of publications Monday, Feb 20, 2006 |
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Agri-Biz & Commodities
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Technical Analysis Bullish trend in NY cotton futures Gnanasekar T.
The US Agriculture Department forecast on Friday that China would import 18.5 million bales of cotton during 2006/07, compared with 17.0 million bales this marketing year. The USDA pegged the country's consumption of cotton at 49.5 million bales in the 2006/07 season, up from 45 million in 2005/06. Meanwhile, the USDA also estimated the US 2006/07 cotton production at 21 million bales, down from 23.72 million in 2005/06. Futures also got a boost from the weekly export sales report of the US Department of Agriculture. The USDA report showed total the US upland cotton sales at 4,36,600 running bales (RBs, 500-lbs each), from sales last week of 4,79,200 RBs.
The active March contract rallied higher after finding support at lower levels during the week. Supports are quite strong near the 54-55c levels presently. A potential technical target falls at 68-70c for cotton futures in the months to come. However, psychological resistance will be noticed at the 60c level initially. We have been bullish on cotton futures for the past few months as, the bigger picture weekly charts shows a bullish triangle pattern in the making. Elliot wave analysis points to a corrective pattern in progress, ending at 41.71c and a new impulse still in progress. The corrective second wave of that impulse looks to have ended at 46.10c. It now looks to have begun the big impulsive third wave move, which we have been expecting for a while. RSI is in the neutral zone indicating that it is neither overbought nor oversold. It is also showing a negative divergence, where prices are making a higher high not confirmed by a higher high in the indicator. The averages, in MACD are above the zero line in the indicator suggesting bullishness. Current prices are above the short-term average of 8-day EMA at 56.62c indicating bullishness and the 34-day EMA is at 55.78 cents. Therefore, look for cotton futures to rise higher. Supports are, at 56.40, 55.40 & 54.85 cents. Resistances, at 57.80, 58.25 and 60.50 cents respectively.
(The author is associated with the Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not that 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.)
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