December cotton futures on the New York Board of Trade have seen a sudden and steep uptrend develop over the past few weeks. In fact, in around six weeks’ time December cotton went from a fresh contract low in mid-June to a fresh contract high in early July. Bullish fundamentals include less U.S. planted acres for cotton, combined with increasing export demand for U.S. cotton. Technically, see on the daily bar chart that prices are in a steep uptrend, including recent gap-higher price moves that have taken the market to a fresh contract high.
See, too, on the daily bar chart for December cotton that the shorter-term moving averages I follow (9- and 18-day) are in a bullish mode as the 9-day is above the 18-day moving average. One early clue that the strong uptrend in December cotton is coming to an end would be if these two moving averages produced a bearish line crossover signal, whereby the 9-day crossed back below the 18-day moving average. See, too, at the bottom of the daily chart that the Directional Movement Index (DMI) has an ADX line reading of 52.83. Any ADX line reading above 30.00 does suggest that a strong price trend is occurring in a market. The cotton bears and presently argue that prices are over-extended on the upside and due for a corrective pullback very soon. See support and resistance levels on the chart. Stay tuned!
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