ICE cotton hit a five-month high on Thursday but ended the day down for the first time in five sessions after hitting technical resistance and encountering little demand at higher prices. The most-active May cotton contract on ICE Futures US fell 0.63 cent, or 1 percent, to settle at 64.69 cents a lb after rising as high as 65.75 cents, the highest for the second-month since September 18, 2014.
The second-month's 14-day relative strength index breached 70 for the first time in more than a year in the prior session, signalling that the market had entered technically overbought territory. This and other technical indicators prompted speculator selling, said Peter Egli, director of risk management at British merchant Plexus Cotton Ltd.
Cotton is on track to rise for the fourth straight week since it hit near 5-1/2-year lows on January 23, spurring demand, and has only closed a session down on five occasions since then. "We haven't had a correction at all since it took off," Egli said. "It had to pull back. The trend is still up, but it was going too fast, too furious." The market has encountered little demand at these higher price levels given that many mills had purchased a significant amount of cotton at prices below 60 cents a lb, said Jobe Moss, a broker with MCM Inc in Lubbock, Texas. "We're not going to sell it up here at 65," Moss said. "We've got to take the market back down if we're going to sell cotton." Demand was also subdued because of lunar new year celebrations in top consumer China, traders said.
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