Financial Daily from THE HINDU group of publications
Monday, Sep 30, 2002
Agri-Biz & Commodities
Columns - Technical Analysis
Cotton prices may head north
NYCE cotton futures closed stronger across the board on Friday in the aftermath of Tropical Storm Isidore's torrential downpours, which caused persistent flooding and crop damage in prime cotton growing areas.
The entire week was dominated by news of the storm and the potential damage it can cause to the crop. The yields expected would be lesser thanks to the torrential rains where lots of bales are being lost. US exporters would need to significantly jack up sales just to have a shot at reaching the USDA forecast that sales would hit 11.2 million (480-lb) bales in the 2002-03 marketing year (July/August).
The CFTC report showed funds with net long positions of 4,743 cotton lots. The report also said small speculators held net long positions of 3,679 cotton No. 2 lots. While the CFTC data showed the market net long cotton, the overall level of long positions was not hefty enough to either hinder or help cotton prices.
The world consumption though was a disappointment, since this news was already discounted and did not have a major effect. Earlier on Friday, the Census Bureau also revised July figures upward to 8.68 million bales from last month's preliminary result of 8.67 million (480-lb.) bales, and compared with 7.85 million last July.
The active December continued to move up but still within the range it established recently. A decisive move has to happen breaking 45c on the up side for any bullish signs. Strong support can be seen at the 44c level now. The current pattern looks like a bullish triangle pattern, which could break out on the up side at 45c and target the 50c levels again.
As mentioned earlier, a long-term double bottom pattern is also visible on the chart possibly targeting 55c in the near to medium term.
Using Elliot wave analysis, this could still be part of an explosive move to happen possibly the third wave, which has the maximum momentum. The wave counts did not change much as the crucial level for the wave counts to be altered lies at 41.50c.
RSI continues to hover in the neutral zone indicating it is neither overbought nor oversold. The averages in MACD, is still below the zero line in the indicator, and unless it moves above the zero line a clear up trend cannot be confirmed.
Current prices are now above the short-term average of 9 and 50 day EMA lies at 44.95c respectively. Look for prices to consolidate and head higher. Important support levels are at 44.35, 43.10 & 42.90 cents. Resistances at 45.00, 46.90 & 47.20 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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