Thursday’s action offers the look of a reversal
Lower prices were seen early in e-trading and exceeded once outcry opened. As had been suggesting here March slipped below 6300 and for all intents and purposes it felt like we were going to see a further plunge. But that didn’t happen. Instead, bullish options and strong buying prompted short covering and when March ran back up above unchanged more buying spilled into both the ring and platform. This action provided the look of a reversal and March rallied all the way to 6400. And all this transpired in the first half hour.
If that wasn’t enough, March then proceeded to grind lower backing down to 6430 in an effort to test for support. It managed to find it although trading was calm and quiet. However, as the 2:00 bell approached, signaling the close values perked up again as MOC buying was anticipated. The result was a strong close with solid buying and new positions as well as short covering taking place and a strong close.
Technically cotton is oversold and therefore vulnerable to short covering and bottom picking as we saw today. I however am not convinced that this is “the real Mc Coy” yet as fundamentals offer no legitimate reason that that this action will continue. I need hard evidence before I want to jump to the long side for any long term ride. Sure there may be more behind this. We’ve already seen on more than one occasion the type of fuel spec monies can inject into a market like cotton. Which leads me to again say; “This sure isn’t your Father’s cotton market anymore.”
As a result, I suggest that this reversal look will attract additional buyers and carry March higher. We should likely see prices above 6400 in the morning. How much higher is the question? For now look for a move above 6420 to elect further buy stops and more buying. March may very well carry beyond 6600. But until there is evidence of superior cotton sales I will tend to view any rally as a prospect to re-establish a short position. Another key will be how dips get treated, especially if they re-visit the new low of 6291. Until otherwise, the long side may have a run in it.
Support: 6315-6297-6282, 6250-6230, 6084-6071
Resistance: 6425-6442, 6490-6510, 6580-6620
Si quiere más información, por favor contáctenos,
El equipo de Brokers de Futuros USA
Fuente: MF Global
©2007 Jurgens Bauer & Associates all rights reserved.
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