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Cotton futures ended lower on Friday due to speculative selling after a poor US GDP figure sparked weakness in financial markets which spilled over into cotton. The focus of the cotton market will soon turn to the spring planting season and the annual survey of planting intentions by the US Agriculture Department due out at the end of March. The survey by the industry group National Cotton Council showed US 2009 cotton plantings could reach around 8.11 million acres. Globa l cotton consumption is forecast to decline 8.2 per cent from 2008 to 2009 — the largest year-to-year decline since the Depression years of 1937-38, as the world economy falters, the US Agriculture Department said on Tuesday.

Active March cotton futures fell lower in line with our expectations. As cautioned in the previous update, important support at 48.50-75 cents needs to hold good support for bullishness to continue. Failure to hold support here took prices lower. The overall picture for fibre contracts is still weak and only weekly close above 58c will now strengthen the view for a possible reversal upwards. Prices structures points at weakness in the cotton futures to continue falling lower towards recent lows made in 2008 at 36 cents. There also exists a possibility of a test of 29 cents before any major recovery is seen. Resistances are now at 44 cents followed by 45.40 cents. RSI is in the oversold zone now indicating that a possible upward correction to take place. The averages in MACD are below the zero line of the indicator indicating a bearish reversal now. Only a cross over above the zero line again could signal some strength. Therefore, look for cotton futures to test the support levels.

Supports are at 42.20,41.10 & 38c and resistances are at 44.10, 45.45, & 46.98 cents respectively.

Gnanasekaar T.

(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.)

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