MCX Cotton under short covering; Resistance seen at 21390
Commodity Online | May 21 2019
UPDATED 12:10:28 IST

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Technically Cotton market is under short covering as market has witnessed drop in open interest by 10.63% to settled at 8359 while prices up 40 rupees.

Now MCX Cotton is getting support at 21170 and below same could see a test of 21040 level, And resistance is now likely to be seen at 21390, a move above could see prices testing 21480.

Cotton on MCX settled up by 0.19% at 21310 on short covering after prices dropped as imports of cotton increased due to estimates of reduced output this year.

This is a reduction of six lakh bales from the association’s previous estimate of 321 lakh bales released last month, due to lower output in Maharashtra, North Zone, Madhya Pradesh, Telangana and Andhra Pradesh.

CAI’s April estimate lowers cotton crop estimate for 2018-19 season, which began on October 1, 2018, by two lakh bales for Maharashtra, compared to its March estimate. Like-wise, for the North Zone, Madhya Pradesh, Telangana and Andhra Pradesh, CAI has lowered cotton output estimate by one lakh bales each.

Cotton supply is dwindling quickly as 2018-19 crop is likely to be much lower than the initial projection of around 350 lakh bales.

In 2018/19, cotton output is estimated at 300.9 l-bales (of 170 kg each), down about 7.4% compared to previous estimate of 324 l-bales as per latest govt Adv Est. CAI cuts 2018-19 production estimate further by 2 l-bales to 328 l-bales for the year 2018-19.

However, higher imports of 27 l-bales (Vs 15) and lower exports of 50 lakh bales (Vs 69) for 2018/19 season is bearish. According to data compiled by DGCIS, country exported 95,712 tonnes (t) of cotton raw including wastes in Feb, down 20.8% compared to 148,948 t last year.

Trading Ideas:
--Cotton trading range for the day is 21040-21480.
--Cotton gained on short covering after prices dropped as imports of cotton increased due to estimates of reduced output this year.
--Cotton supply is dwindling quickly as 2018-19 crop is likely to be much lower than the initial projection of around 350 lakh bales.
--In 2018/19, cotton output is estimated at 300.9 l-bales, down about 7.4%.
--Cotton prices in spot market gained by 80.00 rupees and settled at 21450.00 rupees.

Courtesy: Kedia Commodities

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