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Gnanasekar. T

New York cotton futures ended lower on Friday and continue to be dominated mostly by switch trade from the spot month, which goes into delivery soon. Market participants shrugged off the US Agriculture Department's monthly crop report and supply/demand estimates, which was somewhat bearish.

There was an unexpected increase of 640,000 bales in the US crop. Also surprising, was the 200,000-bale increase in the projected US exports, especially because the USDA cut its estimate of China's imports by 1 million bales.

The active December contract is consolidating in a narrow range presently. No change in view. Near-term support is at 48.40 cents. Failure to hold support here can take prices further lower to the next important support at 47.70 cents. The underlying trend still remained bearish.

Only a move above 53.10 cents will confirm a bullish reversal. The potential target for the downside is at 46.10 cents in the near-term. Elliot wave analysis stills points to a corrective pattern in progress. A daily close below 48 cents will confirm the corrective pattern we have been tracking and will need to review the counts.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages, in MACD are 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 49.50 cents indicating bearishness and the 34-day EMA is at 50.10 cents. Therefore, look for cotton futures to test the support levels.

Supports are at 48.45, 47.70 and 46.10 cents. Resistances are at 50.10, 51.50 and 52.85 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.)

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