From the April 01, 2011 issue of Futures Magazine • Subscribe!

Cotton bouncing high

We have written about cotton a number of times over the last six months as it has nearly doubled in price since an October low of $1.1113 to the recent record high of $2.1970. Despite analysts expectations for a reversal, it has continued its upward momentum.


“The majority of this last part of the move was commercial panic buying,” says Shawn Hackett, president of Hackett Financial Advisors. “Sometimes these moves are caused by speculators, but this time it was commercials.” At this time of year, he says supplies shouldn’t change for a while. “The only fresh supplies we’re getting now are from Brazil, and that’s pretty small. The market is what it is for now,” he says. Hackett says to watch chart formations, crop condition reports once planting gets started and the CFTC’s Commitment of Traders Report (COT) going forward. He sees resistance in the May contract around $2.00 and support at $1.85.

Tom Mikulski, senior market strategist at Lind Waldock, agrees about supplies but reminds that traders need to keep a global perspective. “If China still is willing to keep buying, they’ve been the major buyer throughout this whole thing; eyes should be on China,” he says. Going forward, Mikulski sees resistance for the May contract at $2.05 and support at $1.85 and then $1.75, although he was reluctant to name any prices. “When you have a market going limit-up and limit-down on a daily basis, it’s almost like playing Russian Roulette trying to call out [price predictions],” he says.

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