Cotton futures in the May contract settled last Friday in New York at 84.68 while ending the week on a positive note up 145 points, breaking a 7-day losing streak currently at 79.89, down nearly 500 points for the week as prices hit a 3 month low.
I have been recommending a bullish position from the 79.00 level, and if you took that trade, continue to place the stop loss below the September 29 low of 66.28 as an exit strategy. This is a high-risk trade as the volatility remains incredibly high as that situation is not going to change anytime soon, especially as we enter the summer season.
Cotton prices are trading below their 20 and 100-day moving average as this recommendation was a counter-trend trade. I believe prices have become too cheap as we topped out on February 25 at 95.68, dropping about 1,800 points in a matter of weeks from today's low. The commodity markets have run into trouble over the last several weeks because U.S. treasuries have hit a 1 year high in yields, pushing the U.S dollar higher, which are two bearish fundamental factors.
I remain bullish across the board. I believe this is just a retracement in a giant secular bullish trend that should continue due to massive quantitative easing from the U.S. government. Traders are keeping a close eye on next week's crop report, which will show the number of acres planted in the United States as that will certainly dictate short-term price action.
TREND: MIXED - LOWER
CHART STRUCTURE: POOR
Coffee futures in the May contract is ending the week on a positive note, up 225 points or 1.78% at 128.85 after settling last Friday in New York at 129.00, basically unchanged for the week bouncing off major support around the 125 level as I think prices look very cheap. Continue reading "Futures: All Eyes On This Week's Crop Report"