The Hindu Business Line : Bearishness likely in cotton

NY cotton futures ended sharply higher on Friday on speculative buying post the announcement of the weekly USDA weekly export sales report ahead of the long US holiday weekend.

The cotton market will be shut on Monday along with other commodity and financial markets for US Labour Day.

Record high wheat prices have also underpinned cotton futures, as there was a good chance of producers planting more wheat than cotton.

USDA’s weekly net export sales figures showed upland cotton sales from the current marketing year increased by 447,700 (500-lb) running bales.

The active contract bounced sharply higher in line with our overall expectations. As mentioned earlier, there were signs of reversals, and a potential rise to 61-61.50 cents looks likely in the coming sessions. Resistance will now be seen in the 63-65 cents range.

Favoured view expects either a consolidation in the 63-65 cents range followed by a rise towards 66.50/70 cents, or a direct rise towards 66.50 cents.

As we have been maintaining, a re-test of 70 cents seen in 2004 is on the cards. The bigger picture looks bullish and is set to scale new peaks after prices broke above the 60 cents range convincingly.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages, in MACD are still below the zero line indicating bearishness.

Only a cross-over of the averages above w the zero line again will now indicate bearishness.

Therefore, look for cotton futures to test the resistance levels.

Supports are at 60.25, 59.25 and 58.75 cents.

Resistances are at 61.75, 63 and 64.50 cents respectively.

Gnanasekar T.

(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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