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Cotton - Strong Trend

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Cotton is another commodity which over the past 20 plus days has performed admirably on the long side. There is a story behind the rise based on fundamentals and the decisions involving countries in Asia. Pakistan, India and China being the participants in this story. 

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I am replying back to myself but the Cotton price action really interests me.

 

The trend is very bullish and extremely strong from a 4 hour chart perspective.

 

It makes me laugh as if you go back six months or more then the media were reporting how Cotton prices should remain low, etc. This is what I call 'Market Noise'. One must ignore the media and literally park it to one side or not look at it when making any decision to enter or exit a trade.

 

Let the price action and trend determine your entry and exit points. Cotton is not just walking but running like an Egyptian!

 

 

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Cotton is approaching $80.00. There are fundamental reasons behind the move as I have touched upon before such as Hurricane in Florida amongst other things. 

 

Some have suggested 'Buy the Dip' strategy. As there has been a dip in the price action of Cotton and now it is hinting at a move upwards then it may be an opportunity for anyone to test such a strategy on Cotton.

 

The risk is that the trend has been in play since middle of November 2017 and we have seen plenty of upside so we do not know how long the upward move is still to run. However, experience has taught me that trends last longer than we all think and it is important not to exit too early. We want to maximise out profit and minimise our losses. It is the falls that are quicker and more ruthless. The rise in a trend can last many weeks, months and years.

 

 

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Well Cotton hit $82.74 today. The trend is strong and bullish and if you look back at my posts this was coming.

 

From a fundamental perspective, the US has reported strong data for actual Cotton shipments as well as export sales. This is on the eve of a key report which is due tomorrow. Also there is speculative money flowing in Cotton and this combined with demand has led to this recent rally.

 

Tomorrow will be interesting with the USDA report. Apparently stocks have been tighter in India than USDA have reported but all will be clear tomorrow. It is worth watching the price action of Cotton tomorrow to see how it performs.

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The price action is lovely with Cotton right now with another additional strong breakout to the upside to support the current bullish trend in play.

 

At the time of writing Cotton had hit $92.37.

 

From my experience, this will now test the magical $100.00 mark. I have seen this time and time again when it gets close to such a critical price level the market, speculators, trend followers, etc. will all ensure this goes all the way to $100.00. 

 

Fundamentals are also positive with Cotton at the moment. It is reported that farmers in certain US states are ditching Wheat for Cotton. Also Cotton can withstand the drought. It is all about supply and demand. Around three years ago I recall low prices leading to farmers planting with the fewest acres with Cotton in over 30 years. This naturally brings us to where we are today due to simple supply and demand economics.

 

NY Cotton_20180529_19.26.png

 

 

 

 

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TF 

 

sounds like a good trade to enter with cotton options.Usually when dollar is strong, cotton prices get weaker, so good underlying strength, worth a punt

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Punt = Casino / Bookies

 

Punt = Trading without a plan / relying on luck and hope

 

Strong Bullish Trend = Trading / Investment with a specific plan / Use of Risk Management 

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TF 

 

Trend trading gambling , you can also get trends on horse betting, 

 

Short term trading is betting, that is why it is tax free.A trend can stop immediately after you enter a trend, it could reverse and fail.This is why every trend trader must have a game plan for failure and exit of trends, it is very difficult to time the entryso an option trade offers lowest risk highest reward ratio, if bullish options spreads are purchased.

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Here is hindsight technical analysis , as per resident forum guru.There was a nice opportunity earlier after resistance became support.cottom.jpg 

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A punt is betting or speculating on something. I accept there will be many that simply speculate and bet on share price movements, FX price movements or commodity price movements. 

 

You cannot compare trading (which can be weeks, months or even longer) depending on the trend to betting on horses unless you apply the same 'punt strategy' for both. 

 

There are instances where it makes sense to 'spread bet' over a longer horizon than merely a short term trade. There are a few examples in the commodities market where 'fundamentals' and 'technicals' have met nicely. Examples like Lumber, Orange Juice, Soybean Meal and Cotton to name a few. 

 

In my experience when there are clear signals of a bull market then it can be profitable to hold 'spread bets' for a longer period to achieve better profit maximisation. Again in my experience those who short tend to go for more shorter term 'spread bets'. 

 

I accept the image that spread betting is for short term trades still holds true to many. However, I find 'spread betting' bullish trends more profitable by holding until there is a clear trend reversal and this can be days, weeks, months, etc.

 

However, where I agree with  is that when using 'balance of probability' based on calculated odds then it is very similar to gambling. This is why you will find that some of the biggest hedge funds and quants hire professional poker players. These are people who are exceptional at calculating the odds of success or failure on a particular trade before making a decision on whether to trade or not. 

 

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Cotton is still in the race to try and hit $100.00. It has not given up yet but is struggling for the last push up. 

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Cotton is beginning to look interesting again. It hit the $89 level today and there seems to be some short term momentum but whether there is enough legs for £100 is yet to be seen. 

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Cotton is another fantastic shorting opportunity presenting itself in the world of Commodities. This is the beauty of Commodities. They have clear trending opportunities to trade both 'Long' and 'Short'.

The chart below speaks volumes!

163521969_NYCotton_20190513_19_03.png.21f34c4d2ebbb7786455bd1e1d0d4736.png

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I stated in my previous post that Cotton was a fantastic shorting opportunity. Some of you will have been shorting Cotton.

The latest price action on the 'daily' chart still supports my view as shown below.

566680697_NYCotton_20190721_09_58.png.c38af75ce332ec211dd1053f84842e13.png

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Cotton's downward price action continues. Add leverage to the mix and you get my 'mixture'!

It is all about identifying the strongest trending assets either upwards or downwards. It really does not matter. The downward trending assets seem to include faster moves and hence you are holding your position for a shorter time.

193703370_NYCotton_20190802_10_05.thumb.png.c738cca7a7928e04769b1a6ef30ad1b8.png

When you have a strong trending asset, one does not need to worry about the daily fluctuations and price volatility. One just needs to trade in the direction of the trend and one should know their exit price at all times. This will change with a 'trailing stop loss' but one should understand their exit plan. 

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Cotton is looking like it want to breakout from the doldrums. Of course it could just be a short covering rally. 

I am including two charts from the 'daily' below.

2133566236_NYCotton_20191011_17.23-2.png.81f2a7462f18e6fcbd8c8cd1f1a1ff00.png

328254224_NYCotton_20191011_17_23.png.86c0b1029a7cffe9ed6a5baec933edf4.png

 

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Cotton is approaching a level where a breakout out becomes a realistic possibility. 

It is being reported that Cotton's price may be too low at current levels to encourage production. If this is true then there is the distinct possibility of a price rise. 

One must monitor the price action like a hawk to see if any trend develops and manifests into a strong and bullish upward move.

1185531038_NYCotton_20191206_18_43.thumb.png.68b26b7bf4720b6219ce7e50468da410.png

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