Commodities

Pick of the week: MCX cotton (₹20,590) BUY

Gurumurthy K BL Research Bureau | Updated on January 28, 2014 Published on January 28, 2014

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The price action in the cotton contract traded on the Multi Commodity Exchange (MCX) offers a good trading opportunity for the short-term traders. The strong fall since the 2013 high of ₹23,740 found support at the long-term trend line. The contract bottomed at ₹18,210 in November 2013 and has been in a strong uptrend since then.

Short-term view

Bullish signals are emerging on the daily chart. The 200-day moving average, currently at ₹20,120 is providing good support over the last couple of weeks. Also there is a bullish cross over of the 21-day moving average with the 200-day moving average. Short-term traders can go long with a stop-loss at ₹19,870. Immediate target is at ₹20,969, the 50 per cent Fibonacci retracement level. A breach of this level can take the contract higher to ₹21,620. Declines to ₹20,100 can be used for accumulating long positions.

Medium-term view

The medium-term trend is also up. Strong support is at ₹18,600. The outlook will remain positive as long as the contract trades above this level. But, there is a key resistance at ₹21,620, the 61.8 per cent Fibonacci retracement level. This resistance has to be breached for the current up move to extend further. Inability to breach this resistance can trigger a pull back to test the support at ₹18,600 in the medium-term. On the other hand, a break above ₹21,620 will open doors for the next target of ₹23,500.

Published on January 28, 2014
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