Buyers Taking Control of Cotton’s Decline

Andy Waldock |

cotton futures, trading cotton futures, buying opportunity in cotton, cotton prices, cotton futures pricesJuly cotton has sold off over the last month along with the rest of this year’s crop markets. The drop in the cotton market however is being bought with considerable interest by the cotton market’s end user commercial traders. Commercial traders have been net buyers in each of the last four weeks adding more than 22,000 contracts. Furthermore, while the commercial traders have been adding to their long position, overall open interest has been declining. This places a larger concentration of positions in the hands of the commercial traders as the market’s other players are getting washed out on this downdraft.



Technically, the short-term moves in the cotton futures market appear to be setting up a textbook bullish divergence bottom which you can see on this chart. The first low was made on May 28 at 83.86. This was low enough to trigger the first buy signal which we sent out the following day. Three sessions later, the market traded up to 88.60. Yesterday’s low of 84.07 came very near our previous protective stop price but more importantly, it registered a much higher reading on our short-term momentum indicator. The large difference in this indicator reading versus market lows only .21 points apart is the key visual signal in this bullish divergence pattern.

There is a golden setup here to re-purchase the cotton futures market, buying the decline along with the commercial traders. Most importantly, the risk on the trade is only to yesterday’s low of 84.07. Whether the trader chooses to buy in above today’s high on a stop, forcing the market to prove its conviction or, takes advantage of the minimal risk based on the market’s current price, this is a classic commodity trading pattern.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AQNM Aquentium Inc 0.01 -0.00 -16.67 155,213

Comments

Emerging Growth

Blow & Drive Interlock Corp

Blow & Drive Interlock Corp manufactures, markets, leases, installs and monitors a Breath Alcohol Ignition Interlock Device mechanism on the steering column of an automobile and into which a driver…

Private Markets

BioSculpture Technology, Inc.

BioSculpture Technology, Inc. (“BST”) is a commercial-stage medical device manufacturer of liposuction surgical instruments for surgeons. It offers the FDA-cleared Twin Cannula Assisted Liposuction ("TCAL") Airbrush Liposculptor II® controllers, Airbrush®…

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…