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Cotton Forming Possible Double Bottom


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Cotton has made a series of lower highs and lower lows on its weekly continuation chart since its June 2018 peak. It officially moved to a bearish trend when it closed below its 50 WMA in September 2018. This trends dominant measured move has a shallow retracement with 14:4 right-handed skewing. This indicates a strong downward trend with strong momentum. Its minimum target is ~ 53.55. However, we might finally be seeing a short-term rally developing. The continuation chart shows a potential double bottom pattern forming. We just need a close above 60.25 to confirm it. Its target would be ~ 63.69.

Whats supporting this possible pattern?

--COT report shows large traders near record shorts, which is bullish

--RSI shows bullish divergence

--Chaikin Money Flow shows bullish accumulation

--Seasonality turns bullish late August into March

What are the potential obstacles?

--Monthly P @ 59.77

--50 DMA ~ 61.30

--Monthly R1 @ 62.96

Forecast:

I anticipate a double bottom pattern forming and reaching its upside target ~ 63.69. I can even see prices rallying a bit further before running into stiff resistance between 64.35 and 65.39. If prices do reach this resistance zone, then further analysis should be done for a possible short trade.



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About the author


I'm currently a middle office analyst for a proprietary trading firm with a BS in finance from the University of Illinois (Champaign-Urbana). I have 20+ years of experience in this industry ranging from working on the trading floors of the CME and CBOE, working in back-office operations, managing a clearing department, trading equities for a prop firm, and trading futures for my own account.  I analyze 30 different futures markets on a daily basis in the following sectors: grains, softs, meats, metals, energy, indexes, interest rates, and currencies. All of my market analysis is technical-based and looks for key areas of support and resistance that could either provide solid reward to risk trades or identify areas for profit-taking.

If you are interested in more of my market analysis, then please visit my blog @ http://tbillstrading.blogspot.com/.  I also provide a subscription-based daily newsletter called "Technically Speaking".  Please contact me @ tbills.trading@gmail.com for more information.

Disclaimer: There is a high risk of financial loss in stocks, futures and options trading. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell stocks, futures, or options. 

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