Are Cotton Prices Going Higher?

08/21/2015 7:00 am EST

Focus: FUTURES

Michael Seery, of SeeryFutures.com,examines the cotton futures market in light of the most recent USDA crop report and suggests that traders looking at possibly taking advantage of this recent price spike should look at some put options. Michael thinks this is just a short-term rally as the fundamentals are still extremely bearish worldwide.

Cotton Futures—Cotton futures in the December contract are higher by 30 points currently trading at 66.82 continuing its bullish momentum as I was recommending a short position over the last several weeks getting stopped out the day after the USDA crop report showed a reduction of 10% of the crop due to reduced acreage which was very disappointing as the market hit the 10 day high, so it’s time to move on as I’m currently sitting on the sidelines waiting for better chart structure to develop.

Prices are now trading above their 20- and 100-day moving average, telling you that the short-term trend is to the upside, as we are now trading at the upper end of the trading range over the last six months, as I still am not bullish this market, but I’m currently not short but I do think China will start to sell some of their massive reserves at these higher prices as traders are awaiting the next crop report—which will be in the second week of September—to confirm production numbers.

Prices traded as low as 61.20 last Wednesday before the crop report was announced, as I thought the fact that China had devalued their currency three times last week would continue to pressure prices, but that number was so shocking it sent everybody running for the hills, as I do think we are near a short-term top and if you are looking at possibly taking advantage of this recent price spike, look at some put options because I think this is just a short-term rally as the fundamentals are still extremely bearish worldwide in my opinion.

Trend: Higher—Chart Structure: Terrible

By Michael Seery of SeeryFutures.com

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