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Friday, 11 March 2016 10:58

Cott-on! | Bullish setup on Cotton Futures

Some setups lead us to believe that, in the medium term, there is a possible long opportunity on May 2016 Cotton Futures.


Looking at the daily chart, we can see that the price is testing the latest low, facing a support level.
Yesterday candle is an hammer that, according to the Volume Spread Analysis, can also be defined as a stopping volume.

cotton may16 hammer stopping volume vsa trading for purpose

Commitment of Traders

If we look at the COT Index, the commercials bullish stance (and the fact that the small speculators, on the contrary, are overly short, and as we know small speculators are often wrong...) could confirm our guess. Also the disaggregated COT, that we aren't showing here, shows a strong bullish stance by the side of 'producers'.

cotton may16 commitment of traders cot trading for purpose

Put/call ratio

Also the Put/Call Ratio, which is currently located around 0.27, gives us a bullish hint.


The only controversial issue is related to the cotton seasonal trend. The 5 and 10 years seasonal charts show that usually cotton marks a top around the end of march/beginning of april. This leads us to an attitude of caution, although this year the cotton has not followed the usual seasonal pattern at all. Nevertheless, as we said, here seasonality is a little bit controversial.

Remember: this is not a trade solicitation and, if you decide to trade, you do it at your own responsibility.

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