NY cotton ends limit down on investor sales, India

 * Market drops nearly 4 pct in limit-down move

 * India export announcement triggers selling spree

 (Adds closing prices and writes through) 

 NEW YORK, Sept 29 (Reuters) - Cotton futures settled limit
down Wednesday on investor liquidation spurred by news that
India has set a date when it will begin cotton exports and by
lower cotton prices in China, analysts said.

 Investors also wanted to book their profits for the end of
the third quarter on Thursday, having entered the rally when it
began in July, according to analysts.

 Cotton has rallied nearly 40 percent for most of the
quarter, the best quarterly performance for a benchmark
contract since 1994.

 India said it will delay cotton exports until Nov. 1 as
rains hurt the pace of harvesting in the world's No. 2 producer
of the fiber. Analysts said the development removed a cloud of
uncertainty over what the country would do and gave players an
idea how much it would sell.

 "The Indian news took some of the steam out of the market,"
Sharon Johnson, cotton expert for financial advisors First
Capital Group in Atlanta, said.

 "It just cooled the panic (buying)," added Mike Stevens, an
an analyst for brokerage SFS Futures in Mandeville, Louisiana.
"The big question mark about India was their on-again,
off-again attitude (about cotton exports)."

 Cotton values in China, the world's biggest consumer, were
also lower overnight and with a holiday there due from Oct. 1
to 7, the market should begin to quiet down a bit, traders
said.

 Cotton's rally has been fueled by robust demand and heavy
buying by investment, hedge and long-only funds that felt the
market was undervalued.

 ICE Futures U.S. key December cotton contract CTZ0
dropped the 4-cent limit to close at $1.0124 per lb. The
session top was at $1.0603.

 Technicians said that between the high of $1.064 and the
area around 96-97 cents where the market took off from on Sept.
23, the 50 percent retracement level would be around $1.017.
 (Graph on cotton's retracement levels:
link.reuters.com/tab26p)

 Cotton volume slowed after averaging 40 percent above the
30-day average for the past week, according to preliminary
Reuters data. Total volume traded stood at around 17,178 lots
at 2:47 p.m. EDT (1847 GMT), 6.3 percent higher than the 30-day
average of 16,000 lots, preliminary Thomson Reuters data
showed.

 Analysts said there was a topside target in cotton between
$1.04 and $1.07 and once the key December contract traded at a
session high $1.064 on Wednesday, most investors felt it was
time to cash in their gains.

 Stevens said there is a gap at $1.0075-$1.0028 left over
from Sunday night. "A close below the gap would portend a
near-term top is in place," he said.

 Analysts said the market will take some direction from the
U.S. Agriculture Department's weekly export sales report to see
if the high cotton prices had dampened demand.

 Brokers believe cotton sales should run from 250,000 to
400,000 running bales (RBs, 500-lbs each), versus sales last
week of 571,700 RBs.