Cotton Futures (ICE U.S. CT) which have been on a volatile, slow decline since mid-June were up $1.93 or 2.9% on Thursday to close at $67.53. This was a 'big' percentage increase of more than one standard deviation above the average one-day percentage move. The trading day also traced out a 'trend day up' pattern, opening in the bottom 20% of the day's high-low range and closing in the upper 20%.
Q: What has happened in the past when cotton has a trend day up when large specs are long and small traders extremely short, omitting any repeat occurrences within 10 trading days?
A: According to the 13 previous occurrences of this event, EventEdge indicates that cotton has shown a strong bullish edge that peaks four trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Thursday, Aug. 21, 2008) is Wednesday, Aug. 27, 2008. Cotton rallies in 85% of the cases (11 of 13) by an average of 3.6% relative to the close on the event date. The average of the two declines is 0.8%. The overall return of the 13 cases is 2.9%, which, based on the close on the event date ($67.53), provides a target price of $69.49.
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Jeffrey Garceau is an analyst with MarketHistory.com.
