Cotton holds key support – what scope for recovery?

Cotton (Dec) had a nice run-up in June from a 71.65 low, but has since fallen all the way back. There is still the chance of support, which we examine below, with clearly defined and limited risk should things go awry. The Commodity Trader’s view WEEKLY CHART - CONTINUATION: The sharp fall from a 91.38 Mar peak has found good support from a 61.8% level on the continuation chart. This is now key to preserving bulls’ medium term hopes. DAILY CHART – DEC-08: After a nice recovery to a 84.04 high in Jun, the 71.65 03-Jun low was revisited. However, support has also been proffered by the falling old resistance/return line. Is this a double bottom in the making..? A fresh break below the 70.86 08-Jul low would put paid to such speculation. Meanwhile, a close above the 75.35 area would be enough signal for some buyers, with stops placed just below 70.86 – clear but limited risk. A further rally through 78.45 resistance would boost the bullish cause, focus then turning to that 84.04 high. There is another bullish clue too… DAILY LINE CHART – DEC-08: Looking at the closing price chart for clarity note an interesting positive divergence on the RSI. There appears to be a good case for anticipating a s/term recovery attempt. CRUDE OIL DAILY CHART – AUG-08: The bearish clues in Crude and Heating oil that we looked at last week were quickly frustrated by another s/term rally. However, this week’s weakness has brought price back to the key area we had been looking at, as the trigger for a bearish signal: - the cluster of Jun lows above 131.33, the 23.6% level (slightly redrawn) PLUS an additional level, a small projected bull channel base. The equivalent support area in Sep is 131.60-132.80. There remains clear s/term bear risk here. Philip Allwright Mark Sturdy Seven Days Ahead