* Strong technicals, U.S. export sales lift prices

* Rally leaves March cotton near technically overbought

* ICE cotton trading closed on Monday for MLK Holiday

NEW YORK, Jan 17 (Reuters) - ICE cotton hit a near five-month high on Friday and ended the week up 5 percent as strong charts drove buying and strong U.S. exports stoked worry over tight supplies in the world's top exporter, even as world inventories balloon.

The benchmark March cotton contract on ICE Futures U.S. closed up 0.61 cent, or 0.7 percent, at 86.80 cents a lb after hitting 87.14 cents a lb, the highest for the front month since August.

Cotton was among the best performers in the Thomson Reuters/Core Commodity CRB index, a benchmark for global commodities markets.

Though U.S. government data on Friday showed speculators trimmed their net long position in cotton contracts in the week ended Tuesday, a subsequent rise in open interest was seen as evidence they renewed their buying later in the week.

Total open interest jumped by 4,111 lots to 181,203 lots on Thursday, exchange data showed on Friday.

Prices hurtled above their 200-day moving average of about 83.70 cents a lb on Wednesday and stayed well above it for the rest of the week.

The week's jump left the March contract on the cusp of technically overbought conditions, with a 14-day relative strength index of 69.50.

Cotton trading on ICE will be closed on Monday, Jan. 20, for the Martin Luther King Jr. Day Holiday.

"We waffled around that 200-day moving average for a while and, once we broke out, that was enough for the specs to say, 'let's go,'" said Sharon Johnson, a cotton specialist with KCG Futures in Atlanta. "Mills have been willing to chase this market."

Weekly U.S. government export data on Thursday showed that mill buying picked up sharply after a holiday lull, stoking worries over tight supplies as the United States bales its smallest crop in four years.

Tight U.S. supplies have bolstered prices and left the market inverted, with nearby prices trading at a premium.

While world inventories are expected to hit record levels in the 2013/14 crop year, about 60 percent of those inventories are projected to become part of China's stocks and are considered unavailable for the global market.

The ballooning inventories in the world's top textile market arrive on the back of a government stockpiling program launched in 2011 that Beijing is reported to be scrapping. (Reporting by Chris Prentice. Editing by Andre Grenon)