The Hindu Business Line : Cotton may be range-bound

Cotton futures ended sharply lower on Thursday owing to a bearish USDA plantings report followed by fund and technical selling. USDA estimated total cotton acreage at 9.25 million acres, down from 10.8 million acres last year and the lowest level since farmers seeded 7.9 million acres in 1983 coming in below market expectations. However, export numbers improved from last week with a combined 90,000 bales in sales for both marketing years and 385,000 bales in shipments. The economic slowdown, which is forecast through at least 2008, is likely to see the demand for cotton affected more than most major soft commodities keeping a lid on prices.

Active December cotton futures tanked lower against our expectations. Break below crucial support at 78 cents triggered a sharp fall and has changed the picture for cotton going forward. Strong support will be seen at 74 cents and more important support is at 72 cents being a trend line support point. We favour the support points to hold and fibre contracts to rise higher again. Very strong resistance is seen at 78 cents now a previous support point. Only a daily close above 79 cents will confirm bullishness ahead.

We expect prices to be range- bound in the coming sessions. The big picture counts still are giving mixed signals and would therefore prefer to watch the prices for more clues.

Indicators are displaying a neutral picture. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator indicating a bullish reversal. Therefore, look for cotton futures to test the resistance levels.

Supports are at 74, 72.50 and 69.50 cents; and resistances are at 76.25, 78 and 80 cents respectively.

Gnanasekaar 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.)

More Stories on : Technical Analysis | Cotton

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

Stories in this Section
Bay whirl hangs too far east for south’s comfort

Allahabad HC rejects Bajaj’s plea on cane price issue

Coonoor tea prices rule firm

Good demand seen at Kolkata tea auctions

Gold may test resistance

Cotton may be range-bound

‘Our aim in WTO is to get better market access for agri sector’

Gold may hit $950, but dollar likely to gain strength