Cotton price rise from a speculative buying boost

THE cotton market surprised most traders Tuesday with a sharp rally and, despite not being able to hold all the gains, prices managed to settle higher across the board.

Traders attributed Tuesday's gains to speculative-type buying, with the question being was it new longs piling in or shorts liquidating under pressure providing the lift?

Talking to physical traders, there seemed to be some resting bids under the market, however, most believed there was not any real volume of new business pushing the market higher.

Outside markets may have helped support the buying in cotton.

As for Tuesday's action, prices started lower but quickly found resting support, allowing prices to push higher through the night.

Option volume was estimated at 6308 contracts, 3893 calls and 2915 puts.

Implied volatility was up in the front two months, with May at 22.75%, July at 21.25%, while December settled unchanged to lower at 17%.

Technically, Tuesday's action produced a new move high but not a new move high close.

The daily RSI also failed to make a new high as the bearish divergence there continues to cloud the immediate bullish call, despite the ability to continue to hold trend support.

This week the Ecom operated warehouse in Fort Worth was the recipient of the most new bales, with 1576 bales added there.

The cert stock is now 89% comprised of bales from the 2013 crop and 14,222 bales are four months and older.

Topics:  commodities markets namoi cotton