On January 12th, the USDA published the World Agricultural Supply and Demand Estimates which showed an uptick in production and ending stocks for the US cotton crop. Favorable yields from key growing areas in Texas helped boost domestic production figures above previous estimates, which was partially offset by an increase in exports. Despite an initial sell-off in prices, the market has gathered itself nicely and remains in a positive trend.
Given the uptick in both domestic and world ending stocks for the 16/17 crop, market participants are now asking “Can cotton futures maintain these prices?” Fundamentally, the market seems to be well-supplied with the recent USDA report confirming an uptick in ending stocks; however, the intermediate term bull trend in cotton remains in effect until price action deviates from the higher high, higher low market structure. In order for the market to do this, the March’17 contract would need to produce a close below the 69.32 swing low from 12/20. Until then, the trend remains positive for the cotton market and a retest of the August 5th highs cannot be ruled out of the equation.
March’17 Cotton Daily Chart
Source: RJO Futures Pro
Series 3 Licensed, CMT
Market Strategist II
Erik attended the University of Illinois in Champaign where he majored in Communication with a concentration in Economics. As a member of the Market Technicians Association, he has distinguished himself as a professional in the field of technical analysis and currently holds the Chartered Market Technician (CMT) designation.
Erik began working as a Technical Analyst at JS Services Research and Trading LLC, where he analyzed futures contracts providing traders with key technical levels and trading strategies. While there, he also created a 4-week Technical Analysis educational course geared toward teaching traders how to utilize Technical Analysis in their trading strategies.