The Hindu Business Line : Cotton futures may test support, rise

New York cotton futures edged lower on Friday as the market awaited the important demand/supply data from USDA next week. The active December contract is still trapped in a broad range and we still believe prices are preparing itself for the next big move. Supports are at 52.25 cents followed by important support at 51.20 cents. The bigger picture for cotton futures still looks quite favourable for a test of 60 cents or even higher as long as 49.75-50 cents remains intact.

Elliot wave analysis points to a corrective pattern in progress, ending at 41.71 cents and a new impulse still in progress. The corrective second wave of that impulse looks to have ended at 46.10 cents.

A move above 58 cents seems to have indicated the beginning of the third wave move targeting 73-75 cents, but at the same time should not drop below 48c for the bullishness to remain intact. RSI is in the oversold zone indicating a correction upwards in the offing. The averages, in MACD have gone below the zero line in the indicator suggesting bearishness.

Only a crossover of the averages above the zero line again will indicate a bullish reversal. Current prices are below the short-term average of 8-day EMA at 53.73 cents and the 34-day EMA is at 54.68 cents. Therefore, look for cotton futures to test the support levels in the coming week and rise higher.

Supports are at 52.25, 51.50 and 49.72 cents. Resistances are at 53.50, 54.87 and 55.60 cents respectively.

(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.)

Gnanasekar. T

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