Cotton futures were trading limit-up in early trading Monday, amid bullish "outside markets" that included stronger grain and crude oil futures prices and a sharply weaker U.S. dollar. December cotton futures were limit-bid 300 points higher at 82.45 cents.
December cotton futures have seen a strong surge in prices the past two weeks, after having hit a fresh six-month low of 71.65 cents on June 3. Recent price action also negated a 3.5-month-old downtrend line on the daily bar chart for December cotton.
Prices on Monday also pushed above a key Fibonacci 38.2% retracement level of the price move from the March contract high of 98.45 cents to the June low of 71.65 cents. That retracement level is located at 81.89 cents in the December cotton contract. The important 50% Fibonacci retracement level of that same price downmove comes in at 85.07 cents. A push above that price level would provide the cotton bulls with more solid upside technical power.
The next upside technical objective for the resurgent cotton market bulls is pushing the December contract above chart resistance at 84.00 cents. Above that also lies strong technical support at the April spike high of 89.49 cents.
Technical support for December cotton is located at the May high of 81.44 cents, at 81.00 cents and then at 80.00 cents.
Large non-commercial traders--the big speculative funds--added 2,943 new short positions in ICE cotton in the week to June 10, compared to 962 longs, according to the latest Commitment of Traders report issued by the Commodity Futures Trading Commission on Friday. The COT data for cotton can actually be deemed as a bullish development due to the fact that late last week saw a very sharp rise in cotton futures prices. This suggests those recently established fresh short positions by the funds are now under water and are very likely going to have to be liquidated at some point soon, which would drive cotton futures prices even higher.