May 16 (Reuters) - ICE cotton futures fell about 4 cents on Tuesday, halting three straight sessions of gains, on a technical sell-off and speculator liquidation after cotton hit near three-year highs on Monday.

"The market was technically overbought and it was due to come down now," said Louis Rose, co-founder and director of research and analytics at Rose Commodity Group.

The first month July cotton contract on ICE Futures U.S. closed limit down, or 4 cents lower at 81.32 cents per lb. The contract registered an intra-day decline of 4.69 percent, the sharpest since July 7, 2014, and traded within a range of 81.32 cents and 85.18 cents a lb.

Tuesday's price move prompted the ICE Futures U.S. exchange to expand the daily trading limit for all Cotton No.2 futures to 5 cents, effective with the start of trading for Wednesday. "I don't think the volatility is gone yet," Rose added.

* Certificated cotton stocks deliverable as of May 15 totaled 374,699 480-lb bales, up from 353,694 in the previous session.
* Total futures market volume fell by 61,878 to 45,223 lots. Data showed total open interest gained 6,933 to 262,033 contracts in the previous session.
* The U.S. Department of Agriculture's weekly crop progress report released on Monday showed that 33 percent of cotton crops were harvested in the United States by the week ended May 14, up from 21 percent in the previous week, but slightly below the five-year average of 37.

(Reporting by Nithin Prasad in Bengaluru; Editing by Leslie Adler)