Sowing The Seeds Of A Bull Market For Cotton?
Today’s Spotlight Market
A quick look at the most recent Commitment of Traders report shows non-commercial traders becoming increasingly bullish on Cotton after adding over 7,000 new net-long positions for the reporting period ending 4/7/2015. This has sent the overall net-long position for large speculators to nearly 44,000 contracts. Non-reportable traders are also increasing their net long positions with over 3,700 new net-long positons added. Commercial traders are on the other side of the trade with over 10,000 new net-short positions added. ?
Fundamentals
After 4 years of sharply lower prices, U.S. Cotton producers may have finally got the message and are curtailing planted acreage this season to the lowest levels in 6 years. In its U.S. planting intentions report release last month, the USDA estimates 9.549 million acres will be utilized for Cotton production this year, which is down 13% from a year ago. In addition, Cotton planting in the state of Texas, the largest Cotton producing state in the U.S., are expected to fall to just over 5.71 million acres this season, which would be a reduction of about 8% from last year. While U.S. Cotton production is expected to fall, traders appear to be hesitant to become overly bullish on Cotton prices until the demand side of the equations can be quantified. First, Cotton bulls have to deal with huge global Cotton stockpiles, especially in China, which is the largest consumer of the fiber. China is believed to be holding well over 50% of the global Cotton stockpile and how it decides to handle its reserves this season could be the determinant to the ultimate direction for Cotton prices in 2015.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Cotton, we notice that since the contract low was made back in January, the market has made a series of higher lows and higher highs. Prices are currently hovering just above both the 20 and 200-day moving averages (MA), and it appears that the 20-day MA is poised to cross above the 200-day MA, which is generally viewed as a bullish indicator. The 14-day RSI has moved to a neutral stance with a current reading of 53.72. 66.70 is seen as the next resistance level for the July contract, with support found at 62.58.?
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.