Cotton and BAL ETF Are Forming a Major Bottom"Smart Money" commercial hedgers in cotton futures have been basically net long since August of this year. In a hedgers market this rarely happens and so it should be viewed as of major significance for price fundamentals. The commercials typically are net short and use the futures to hedge their underlying tangible commodity position. So what this data is telling us is that the price of cotton futures is so low, that they are completely unhedged for the first time in years.
Additionally on the push to new price lows in November there is a bullish divergence or non-confirmation in the large speculators net positions. This is a hallmark sign of the end of a trend based upon the CoT data.
Additionally, the price of BAL is forming an ending diagonal or three push type pattern with declining intensity and bullish momentum divergence. The set-up is exceptional for a long position here. There are several indicators that could be used for entry. A cross of momentum/ROC above neutral is one. Also based upon the chart, a close back above the June 2012 low, would be evidence that the stop running may be complete, and price is free to move up.
Wedges or diagonal patterns like this often lead to explosive moves, and it seems likely that price will rally above 46.00 on the first push up and take out any stops above the 9-12-14 high before a possible consolidation. However, that would be just the first push in a larger expected move of probable bull market proportions in coming months.
Cotton
Cotton (CT) Bottoming on Daily/Weekly ChartIn the first few hours following NFP on Friday, CT showed some hesitation before finally seeing an upside spike right in the closing hour, breaking it above downchannel resistance on the 4hr chart. In the daily chart, the symmetrical triangle CT finds itself in is edging closer towards resolution. Given that CT's RSI, Stochastics and MACD on the daily and 4hr charts are all sloping up, the symmetrical triangle will likely resolve to the upside. Just above the symmetrical triangle resistance is a horizontal resistance line I`ve drawn which served as a pivot a number of times over the last three months. Once broken, the next key upside target will likely be at roughly the 66.5 horizontal resistance and followed by another horizontal resistance line drawn near 68.
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