The Hindu Business Line : Upward tweak likely in cotton

New York cotton futures ended marginally higher on Friday helped by a technical recovery in prices. However, fundamentally, the market is struggling from an increase in global production, while consumption has been reduced.

The active December contract corrected higher as per expectations. A double bottom formation is seen at 48.10 cents, which is a bullish sign. As mentioned in the previous update, a retracement to 51.50-52 cents was seen. Further bullishness can be expected and a test of 51.80 cents or even higher to 52.85 cents can be seen being the fibonacci retracement point. However, with the underlying trend still remains bearish, and we would look at the current retracement as a corrective up trend only. Only a move above 53.10 cents will confirm a bullish reversal. The potential target for the downside is at 46.10 cents in the near-term.

Elliot wave analysis stills points to a corrective pattern in progress. A daily close below 48c will confirm the corrective pattern we have been tracking and render our previous wave counts of no use. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages, in MACD are below the zero line in the indicator suggesting bearishness.

Only a cross-over of the averages above the zero line again will indicate a bullish reversal. Current prices are above the short-term average of 8-day EMA at 49.95 cents indicating short-term bullishness and the 34-day EMA is at 50.68 cents. Therefore, look for cotton futures to correct higher and test the resistance levels.

Supports are at 49.95, 48.65 and 47.76 cents. Resistances are at 51.50, 52.85 and 53.25 cents respectively.

(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd(MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

Gnanasekhar T.

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