Cotton bears target lower after latest support failure

During Jul/Aug the fall in Cotton prices had slowed notably, and bears had looked tired. However, a break of key support in early Sep gave them a new life lease, with the risk that the downmove would accelerate. The Commodity Trader’s view

• WEEKLY CHART – CONTINUATION: In the Commodity Trading Guide we had been looking at possible support around the 76.4% 56.70 level (see next chart too). This has not held, due partly, we believe, to the fresh energy that bears have derived from the early Sep break of a key support line (see Daily chart).
• WEEKLY CHART – DEC-08: On the weekly chart of the front month we had noted the ’98.45-71.65’ equality target off 84.04 Jun high, at 57.25 – not far from that 76.4% level. It has not been effective, so the next target on the list lays around 51.60, the 2.618 swing off prior 71.65-84.04 upleg. Looking at the daily chart…
• DAILY CHART – DEC-08: In recent Commodity Guides we had mentioned the risk of a downward acceleration should the (former) key support line fail. This appears to be taking place, and on this chart note two bear channel base projections that currently converge below the 50.00 level – potential support if other levels fail. At this stage the first bull sign would come from a recovery through that old support/return line plus more recent falling resistance line. Any sellers on upticks would likely place stops above this resistance, i.e. above 65.00.

Philip Allwright Mark Sturdy Seven Days Ahead [For the complete and illustrated version of this and future Updates be sure to sign up at www.sevendaysahead.com]