Cotton futures closed firmer on Tuesday on end-of-the-year speculative short-covering and trade buying, and follow-through purchases may push the market higher before the week and year is out, analysts said. The New York Board of Trade's March cotton contract surged 1.28 cents to end Tuesday at 44.20 cents a lb, trading from 43 to 44.24 cents. May increased 1.26 to 44.66 cents, and the back months climbed 1.34 to 1.50 cents.
Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia, said the March contract is taking aim at 44.50 cents to see if it can touch off automatic buy orders believed sitting beyond that level.
"This is just technical end-of-the-year buying," he said, adding the failure of the market to push past its recent lows prompted speculative accounts to cover their positions.
Fundamentally, the market must still content with record crops in both the US and places like China. The analysts are looking closely whether consumer buying of cotton would be enough to absorb the record crops to be harvested this season.
Speculative buying enabled cotton futures to shoot up from the opening bell. Small speculators who had been a bit short in the market covered and some dealers feel trade buying tied to export orders may have also been behind the surge.
"The specs accounted for most of the rise, but you wonder is some orders were booked by the trade and merchants in there," one broker said.
Dealers said that once players completed their year-end positioning in cotton, the market could turn quiet ahead of the New Year.
The market is shut Friday to observe the New Year holiday which falls on Saturday. Trading resumes on Monday, January 3, 2005.
Brokers Flanagan Trading Corp forecast resistance in the March cotton contract at 44.75 and 45.30 cents, with support at 44 and 43.40 cents.
Floor dealers said estimated final volume stood at 14,000 lots, up from Monday's 7,352 lots. Open interest climbed 1,099 lots to 85,641 lots as of December 27.
Comments
Comments are closed.