* July/Dec spreads unwind, pulling July futures off 3-week
high
* Deliveries on May contracts transpire without incident

NEW YORK, April 23 (Reuters) - U.S. cotton futures finished
lower on Tuesday, as investors grabbed profits when the market
hit a three-week high for a second straight day, but analysts
said selling remained within the recent range, with prices still
above technical support.
Benchmark July cotton futures on the ICE Futures U.S.
exchange closed 1.02 cents lower, down 1.10 percent, at 91.46
cents per lb, and traded from 90.05 to 92.86 cents. The session
top, was the contract's highest in 20 days, nearly forming a
double top with Monday's peak.
July volume was healthy at 15,412 lots.
May cotton deliveries have been carried out normally, and by
now, notions of a squeeze on the contract have become moot,
despite some traders positioning for that possibility a week
ago.
"May is dying a natural death and it's not going to be
squeezed. Open interest dropped sharply and the May contract
went through a natural liquidation process," said Mike Stevens,
independent cotton analyst in Mandeville, Louisiana.
Deliveries on the May contract began Monday night.
May's open interest dropped sharply to 299 lots, equivalent
to about 31,145 (450-lb) bales. May volume came to a paltry 46
lots. The contract closed at 89.36 per lb.
"Yesterday's break out to the upside was all technical, but
we ran out of gas this morning--ran out of buyers--and saw some
profit taking in the July/December spread," said Stevens.
He added that the July/Dec spread has been a popular trading
vehicle for investors holding long July and short December
positions on cotton contracts.
"Consequently, when you start taking profit on the July/Dec
spread it helps to bring the market down once it runs out of gas
on the upside," said Stevens.
Noting that July cotton has held to a range roughly between
88 and 94 cents a lb since early March, with a band of support
between 88 and 90 cents, Stevens said, Tuesday's selling did not
hurt the contract as it continues to build a sideways base.
Tuesday's estimated volume was 19,503 lots, about 20 percent
below the 30-day average, according to Thomson Reuters data.
Total open interest fell by 679 lots to 183,240 lots as of
April 23, the lowest since March 15, ICE Futures U.S. exchange
data showed.