The Hindu Business Line : Cotton prices to move up

NYCE cotton futures closed on Friday with small gains on thin speculative interest, with more sideways action predicted ahead of the New Year holidays next week.

With most players having closed the book for the year, the prices are bound to remain on the sidelines till the beginning of 2003. So, trading is likely to be quieter between now and the New Year.

The weekly USDA export sales report came in at the lower end of expectations. Total net upland cotton sales touched 178,600 running bales (RBs, 500-lbs), below trade expectations it would range from 200,000-220,000 RBs. However, Chinese shipments were higher which lent enough support for prices.

According to the USDA data, China has bought a total of 589,400 RBs of cotton in the 2002-03 marketing year starting in August and total shipments have already reached 322,400 RBs. USDA, in its monthly production report, projected Chinese cotton imports at 2.0 million (480-lb) bales.

The active March contract is moving sideways with amid less volumes in a thin trade. A triangle pattern has been broken and this is very positive for cotton in the near term. Crucial resistance will be at 52.50c and support at 51.17. The trend line resistance point at 51.17 was broken decisively last week and prices will find good support here when it heads down again. There is scope for futures to go as high as even 55c in the short to medium term.

Elliot wave counts are showing a corrective pattern in the medium term in progress again. The corrective wave "C" is still in progress targeting higher levels from here with a minimum target of 53 cents and beyond that at 56c. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. A negative divergence has started appearing which could bring in a correction. The averages in MACD are well above the zero line confirming the bullish trend to be intact. A negative divergence is also developing in the MACD, which might bring in a correction.

Current prices are well above the short-term average of 9 day EMA and 50 day EMA is at 47.98c. Look for prices to correct and then head higher. Resistances at 51.90, 52.50 & 55c. Supports at 51.10, 50.20& 49.60c.

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

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