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Cotton Technical Analysis - Cotton Trading: 2018-03-09
Cotton prices rise on US stock cut
Cotton prices advance as US cotton stock forecast was lowered. Will cotton continue climbing?
Traders expected US Department of Agriculture’s Wasde crop report will forecast a downgrade of 500,000 bales to 5.50m bales in US cotton inventories at the close of 2017-18. Wasde data indicated larger stock downgrade than expected, with actual shipments last week the fifth largest on record going back to 1990. Meanwhile dry conditions prevail in Southern Plains where majority of US cotton is grown. Lower inventories and dry weather conditions are bullish for cotton prices.
On the daily timeframe the Cotton: D1 has been retracing following the decline after hitting four-year high in mid-January.
- The Parabolic indicator has formed a buy signal.
- The Donchian channel indicates an uptrend: it is tilted upward.
- The MACD indicator gives a bullish signal.
- The Stochastic oscillator is falling but has not reached the oversold zone.
We expect the bullish momentum will continue after the price closes above the upper bound of the Donchian channel at 86.25, confirmed also by fractal high. A price point above that level can be used as an entry point for a pending order to buy. The stop loss can be placed below the fractal low at 80.63. After placing the pending order the stop loss is to be moved to the next fractal low following Parabolic signals. Thus, we are changing the profit/loss ratio to the breakeven point. If the price meets the stop loss level (80.63) without reaching the order (86.25), we recommend cancelling the order: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Buy |
| Buy stop | Above 86.25 |
| Stop loss | Below 80.63 |
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