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Gnanasekar T.

Cotton futures at the New York cotton exchange managed to closed marginally higher giving up gains by the close after trading as high as 38c. There was volatile trading on Friday with prices going down as low as 35c on poor export sales but with no follow through selling continuing, the market started to head higher. Though cotton fundamentals does not justify the wild move on Friday with a disappointing settlement, the market however tries to portray a bullish posture technically.

Export sales data released by the US Department of Agriculture for the last week was understandably poor with a string of holidays. Exports of 128,800 bales were 48 per cent lower under the previous week's marketing year high and 37 per cent below the 4-week average. Meanwhile, worldwide 2001-02 cotton production is revised upward at a record high of 96.7 million bales, nearly 9 per cent above the previous season and world consumption is estimated at 89.8 million bales, a downward revision from its previous projection. The 2001-02 Cotlook A index, an average of the world's lowest high-grade cotton quotes published by the UK based Cotlook Ltd remained flat at 43.00 cents per pound.

March contract continues to be trapped in a narrow range. This week also displayed the market being trapped in a never ending channel. A triangle pattern breakout has given hope for further highs to happen in the weeks to come. On the downside the 34c level should provide good support failing which we could see a test of 32c. Volumes doubled on Friday. A price move accompanied by good volumes can result in an up trend. The structures as per Elliot wave analysis continues to be the same. We are in a corrective phase with the B wave currently underway in the bigger picture.

RSI continues to be in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are very close to the zero line in the indicator and as long as it continues to be above the zero line there is no cause to worry. Current prices went above the short-term 9 day EMA and the 50 day EMA is now at 36.33. The 50 day EMA should provide excellent support in the week's to come. Look for prices to trend higher with corrections at important levels. Important support levels are at, 36.35,35.60 & 34.80. Resistances, at, 37.60, 38.10 & 40 cents.

(The author is a Chennai-based technical analyst who tracks the international commodities futures markets. This analysis is based on historical price movement of the commodity concerned. There is risk of loss in trading.)

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