Sergey Kamenshikov, Ph.D.
IFC Markets
Global cotton deficit is expected
Yesterday in Paris 150 world leaders met at the 21st conference of the UN Framework Convention on Climate Change. The matter of global warming was in focus. The average global temperature for 2015 will be 0.73 degrees Celsius higher the level of 1961-1990, according to the World Meteorological Organization. For this reason, markets began to worry about the probable decrease in the world cotton crop. Will this factor push the cotton prices up?
The International Cotton Advisory Committee has downgraded its forecast for the 2015/16 global cotton production to 23.11mln tonnes which is 11.73% lower than last season. Meanwhile, it expects the demand to increase by 0.54% to 24.37mln tonnes. The demand-supply imbalance, or the global deficit, is assumed to be covered by means of the global cotton stockpiles which are expected to contract by 5.8% then. The Cotton Outlook agency expects the China’s cotton production to contract by 370 thousand tonnes to 5.01mln tonnes in 2015/16. For this year the agency forecasts the global crops of 22.42mln tonnes which is 555 thousand tonnes less than in 2014/15. It also predicts the global demand for cotton to total 23.39mln tonnes this season. As we see, it assumes the global deficit as well.
Cotton
On the daily chart Cotton: D1 is in uptrend since the start of the year. Now it has come close to the resistance line of the correction downtrend and to its 200-day moving average line. The Parabolic indicator has formed the buy signal. MACD gives no signals yet due to the extremely small histogram bars. The Bollinger bands have widened which may mean higher volatility. RSI is neutral having not yet reached the overbought zone. The Bullish momentum may develop in case the cotton prices surpass the last fractal high, the 200-day moving average, the resistance of the downtrend and the upper Bollinger band at 64.4. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic signal at 61.5. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic signal and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 61.5 without reaching the order at 64.4, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy
Buy stop above 64,4
Stop loss below 61,5
Yesterday in Paris 150 world leaders met at the 21st conference of the UN Framework Convention on Climate Change. The matter of global warming was in focus. The average global temperature for 2015 will be 0.73 degrees Celsius higher the level of 1961-1990, according to the World Meteorological Organization. For this reason, markets began to worry about the probable decrease in the world cotton crop. Will this factor push the cotton prices up?
The International Cotton Advisory Committee has downgraded its forecast for the 2015/16 global cotton production to 23.11mln tonnes which is 11.73% lower than last season. Meanwhile, it expects the demand to increase by 0.54% to 24.37mln tonnes. The demand-supply imbalance, or the global deficit, is assumed to be covered by means of the global cotton stockpiles which are expected to contract by 5.8% then. The Cotton Outlook agency expects the China’s cotton production to contract by 370 thousand tonnes to 5.01mln tonnes in 2015/16. For this year the agency forecasts the global crops of 22.42mln tonnes which is 555 thousand tonnes less than in 2014/15. It also predicts the global demand for cotton to total 23.39mln tonnes this season. As we see, it assumes the global deficit as well.
Cotton
On the daily chart Cotton: D1 is in uptrend since the start of the year. Now it has come close to the resistance line of the correction downtrend and to its 200-day moving average line. The Parabolic indicator has formed the buy signal. MACD gives no signals yet due to the extremely small histogram bars. The Bollinger bands have widened which may mean higher volatility. RSI is neutral having not yet reached the overbought zone. The Bullish momentum may develop in case the cotton prices surpass the last fractal high, the 200-day moving average, the resistance of the downtrend and the upper Bollinger band at 64.4. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic signal at 61.5. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic signal and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 61.5 without reaching the order at 64.4, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy
Buy stop above 64,4
Stop loss below 61,5
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
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