By admin       2019-02-13

Cotton prices have been on a strong downtrend since August 2018. The cotton futures contract on the Multi Commodity Exchange of India (MCX) made a high of ₹24,280 per bale in August 2018, and has been falling since then. This downtrend paused in late December, however, after consolidating sideways in the band between ₹20,500 and ₹21,300, the contract has resumed its downtrend this week. The contract declined breaking below ₹20,500 on Tuesday and is currently trading at ₹20,340.A fall to ₹20,000 is likely in the near term. If the contract manages to bounce from this psychological support, a relief rally to ₹20,500 is possible. However, the downtrend will continue to remain intact, and the relief rally is likely to be restricted to ₹20,500. As such, an eventual break below ₹20,000 will see the MCX-Cotton futures contract tumbling to ₹19,500 and ₹19,400 thereafter.The outlook will turn positive only if the MCX-Cotton futures contract breaches ₹21,000 decisively. The next targets are ₹21,500 and ₹22,000. But such a strong rise looks unlikely at the moment, as the indicators on the charts are also negative.The 21-week moving average has crossed below the 55-week moving average. This indicates that the upside could be limited. As such, any intermediate bounce in the coming days is more likely to get fresh sellers coming in at higher levels.Traders can go short at current levels, and also accumulate on rallies at ₹20,450. Stop-loss can be placed at ₹20,700 for the target of ₹19,620. Revise the stop-loss lower to ₹20,100 as soon as the contract moves down to ₹19,850.Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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