The Hindu Business Line : NY cotton seen heading higher

NYCE cotton futures ended higher on Friday on speculative buying interest and the markets monitored option expiry too. Markets will also keenly watch the USDA supply/demand report next week and this could provide the much-needed direction for the market.

Market participants are betting on a lower crop and positions have been built in lines with expectations. The weekly USDA exports sales data provided no inspiration for futures and served to confirm suspicions among market participants that the level of US cotton exports will likely fail to hit the projection by the USDA of 11 million (480-lb) bales in US cotton exports for the 2002/03 marketing year (July/August).

USDA said net upland cotton sales reached 111,200 running bales (RBs, 500-lbs), near the bottom of trade expectations it would range from 110,000-150,000 RBs. Shipments reached 124,300 RBs, also near the bottom of trade belief it would hover from 120,000-170,000 RBs.

The active December contract moved higher making higher highs and higher bottoms a sign of a good up trend in progress. The channel in which it has been moving crossed decisively at 45.10 cents and broke the important trend line resistance there. The important resistance level at 50 cents needs to be decisively broken to provide strength to the bullish move from here.

A triangle pattern is also in the making and a break of the pattern at 48.50 cents will help prices head higher. Elliot wave counts are showing a corrective pattern in the medium term in progress again.

We are possibly in the end of the `B' wave a corrective pattern and the `C' wave has started with a wave equality target, of 55 cents in the medium term. RSI is in the overbought zone and a minor correction took place due to this.

The averages in MACD, have crossed the zero line in the indicator and has turned bullish. As long as it stays above the zero line prices will continue their bullish streak.

Current prices are way above the short term and medium term averages of 9 and 50 day respectively. Look for prices to head higher. Resistances at 48.70, 49.10 and 51.15 cents. Supports at 48.10, 47.15 and 45.60 cents.

(The author is a trader at Scotiabank and the views expressed by him are his own and not necessarily of his employer. This analysis is based on the historical prices movements and there is risk of loss in trading.)

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