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Bearish Technical Action in Cotton


Cocoa has been able to lift well clear of its recent consolidation zone, but a negative shift in its key outside markets leave it vulnerable to profit-taking. Improved global demand appears to be coming sooner than the market has priced in, however, and that should help cocoa prices to hold their ground near their recent highs.


Coffee prices have yet to find their footing this week and are on a 4-session losing streak as they are closer to their recent consolidation zone than to last Thursday’s 14-month high. Although the market has an improving global demand outlook and bullish supply factors working in its favor, the Brazilian currency lost another 1% in value and reached its lowest price level since late October, and that has weighed heavily on coffee prices this week.


Cotton’s whipsaw price action following its wide-sweeping outside-day down negative key reversal last Thursday has resulted in the lowest close since mid-February. May cotton finished with severe losses yesterday and is threatening to take out last Friday’s spike low, and a break below that level would suggest that a larger correction of last week’s 2 1/2 year high is imminent.


With continued carryover pressure from key outside markets, sugar may have further downside left to go before it can find a near-term floor. The Brazilian currency sustained another heavy loss and has dropped nearly 6% in value over the past 5 sessions to reach a 4-month low.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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