The downward movement is going well with the cotton, with the price creeping in the area at 23.6 Fibonacci for some time. The area withstands, and after confirmation by the sword swallow, the movement continues downwards. With the CCI there is also a sword and a divergence, which additionally indicates the reversal of movement. The above graphic is before the development of the movement at the first potential shortstop opportunity.
Now the downward movement continues to test for diagonal support, with which we will expect its break and retest. Here, we believe that a potential second chance will be found for a new short or for additions to the short positions already opened. Confirmation of these scenarios is key and we will have to wait for the price movement to develop.
From a fundamental point of view, cotton production in the world remains high, with India stepping up production, with Brazil, Pakistan, Australia and the US having minimal declines. China, as the world’s leading cotton buyer, has managed to balance production shortages, with demand moderating at this stage. Stronger harvest forecasts remain relevant for several of the strongest extractive countries such as the US and India. Therefore, export expectations are higher, which is a factor that puts pressure on commodity prices.
Trader Martin Nikolov