Medium term
Trade view / 09 September 2016 at 12:14 GMT

Cotton: Short-term bear, medium-term bull

Managing Partner / Spotlight Group
United Kingdom

The technical picture for cotton is a muddled scenario. The technicals for one minute to five hours all scream “Strong Sell”. The daily is a “Buy”, weekly is “Neutral” and the monthly is a “Strong Buy”.

Certainly a weekly chart is not so encouraging as the near-term momentum looks poor with scope to 67.8 a definite possibility. However, I think the short-term play is going to be to highly dominated by the background noise and so I am inclined to look further afield and consider the more macro influences of cotton.

For that reason, I am attracted by forecasts of futures trading at about US cents 71/lb into 2017; that would be 2 cents ahead of the current prices prevailing on the March 2017 and May 2017 contracts.

The reason for the optimism is that there has been a retreat in production prospects in India from rain shortfalls in Gujarat, and increased incidents of pest attacks in Punjab and Haryana.
The weather outlook is not cotton planting friendly and it would be no surprise to see the US Department of Agriculture to downgrade global production estimates in coming months.

 Source: Spotlight Ideas   

Cotton 5-year chart:    
Source: Spotlight Ideas

Management and risk:

Parameters: Cotton CTZ6 December 2016 US Cents/lb
Entry: Buy 68.47,   (1057 GMT)
Targets: 69.66 ... 70.50 ... 71.90
Stop: 65.20
Time horizon: Medium-term

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail