Cotton futures settled lower on Tuesday on investor sales as the market came off a six-month high and appears set to consolidate while waiting for fresh leads, brokers said. The most-active July cotton contract added 0.32 cent to close at 52.75 cents per lb, dealing from 52.07 to 53.25 cents. It was an inside day since the range held within Monday's 51.33 to 53.37 band.
On Monday, the contract closed at 53.07 cents in the loftiest finish for cotton on the second-position charts since late October. Volume in the July contract amounted to 6,554 lots as of 2:38 pm EDT (1838 GMT). Spot May cotton went up 0.08 cent to end at 52.05 cents, trading from 51.30 to 52.40 cents.
"It's just an inside day," said Frank Weathersby, an analyst for brokers Affinity Trading in Fort Walton Beach, Florida. He believed market players seem to be taking a wait-and-see stance to see what the impact of a flu outbreak would have on a struggling economy. "People are not sure about the economy and swine flu," he said. On a technical chart-based level, dealers said the market's near-term direction appears to be higher.
"Any dip is an opportunity used by players to buy the market. We may be backing off a little today, but it looks like we try for higher ground tomorrow," one said. Analysts said the key July cotton contract would take aim at the target of 53.10 cents and a close above that level could lead to a further rise in values.
Brokers Flanagan Trading Corp sees resistance in the July contract at 53.05 and 54 cents, with support at 52.30 and 51.60 cents. Open interest was at 118,887 lots as of April 27, up from the prior tally of 118,524 lots, it said. Total volume traded Monday reached 14,156 contracts, from the previous tally of 10,621 lots, exchange data showed.