Cotton Futures–Cotton futures in the July contract settled lower by 41 points to settle at 66.35 reversing some of the sharp gains that we witnessed in yesterday’s trade as this market still remains bearish in my opinion.
I have been recommending a bearish position from around the 75.74 level and if you took that trade the stop loss has now been lowered to 76.31, however that will come down on a daily basis therefor the monetary risk will be reduced substantially in next week’s trade.
The Chinese Yuan has hit a 4 month low against the U.S dollar as that has a negative influence on cotton prices and until some type of trade agreement with China develops I think prices continue to drip lower.
The agricultural sector has experienced a significant rally especially in the grain market due to weather conditions, however cotton planting is still ideal as weak demand is the main story for this commodity.
The chart structure will start to improve, however I will not be adding any more contracts to the downside as the risk/reward is not in your favor so stick with the original recommendation as we will keep a close eye on weather conditions in the southern part of the United States.
CHART STRUCTURE: POOR
VOLATILITY: HIGHSource: insidefutures.com