* Cotton posts biggest one-day decline since Jan. 25
* Consolidates after climb above 85 cents a lb -analyst
* Price settles below 10-, 20-day moving averages
By Chris Prentice
NEW YORK, Feb 25 (Reuters) - Cotton fell for a third straight session to its lowest closing price in four weeks on Monday as consolidation and weaker outside markets pressured prices and deterred mills from buying into a falling market.
The most-active May cotton contract on ICE Futures U.S. fell 1.42 cent, or 1.7 percent, to settle at 81.72 cents per pound, the lowest closing price since Jan. 28. It was the biggest one-day drop since Jan. 25.
Cotton prices have declined from nine-month highs reached last week, with sideways momentum leaving mills hesitant to buy in case prices slide further. A steep drop in financial markets further added to the pressure.
"Some of this is consolidation, but we're also catching some heat from these outside markets," said Sharon Johnson, cotton specialist at Knight Capital.
The benchmark cotton contract touched 85.24 cents a lb last Wednesday, its highest level since May 2012, but could not sustain those highs. Monday's drop left cotton below both its 10- and 20-day moving averages, key technical levels.
"We're coming down to support (levels) until buying resumes. The mills are looking for a little cheaper price, so when the price dips, they'll come back in," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
While prices are up nearly 8 percent since the start of the year, fiber has slid to three straight weekly declines, stemming what had been a five-week rally since the start of the year and the longest bull run since early 2011.
The recent run-up in prices came in the face of forecasts of record global inventories at the end of the 2012/13 crop year and was seen to be largely driven by speculators' investment.
Noncommercial dealers raised their bullish stance in cotton futures and options for the sixth straight time in the week to Feb. 19, raising their net long position to the highest level since September 2010.
Exchange stocks continued their climb to the highest levels since July 2010, totaling nearly 348,000 480-lb bales as of Feb. 22, according to ICE Data. Another 36,000 bales awaited USDA review on Monday.