Cotton Futures Still in Near-Term Price Uptrend

july2011-cottonICE Futures U.S. cotton for July delivery on Friday hit a fresh five-week high of $1.6849 a pound and then backed off sharply on some profit-taking pressure from recent gains. There is solid follow-through selling pressure on Monday morning, but no serious near-term chart damage has been inflicted as intra-day trading action remains volatile. July cotton futures are still in a three-week-old price uptrend on the daily bar chart, from the May low of $1.4206. While the bulls still have a near-term price uptrend in their favor, they will need to show fresh power very soon to keep the uptrend alive.

The next upside technical objective for the cotton market bulls is to produce a close above strong chart resistance at $1.7500. The contract and all-time high in ICE cotton futures occurred in March, at $2.0997, basis the July contract. The cotton market bears would begin to gain some fresh downside technical momentum by producing a close below strong chart support at $1.5000. Such would then open the door to a challenge of technical support at the May low of $1.4206. Near-term technical resistance for July cotton is seen at $1.6000 and then at Monday’s high of $1.6356. Strong chart resistance is also seen at last week’s high of $1.6849. First support is seen at $1.5500, at $1.5250 and then at $1.5000. Stay tuned!–Jim Wyckoff

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