We advised selling cotton short in the May 7th edition. Cotton for delivery months early in 2014 (before this year's harvest) has been trading at a premium to the later futures but these more expensive months of May and July ‘marked time’ in April this year. Meanwhile the cheaper after-harvest delivery months of October and December both rose a few cents in price, so narrowing this gap a bit.
This rally in the ‘next crop’ produced a top extension in the December delivery month but we advised short-selling the more expensive month of July. All months have dropped since then but July has dropped more. There are several daily-scale bottom extensions in various delivery months now, so it is time to cover shorts to take the 7.5 cent profit:
The drop has brought December down to support from some old weekly-scale compressions but July has not yet reached the equivalent level. Accordingly, we would buy some December (or October, which is about the same price) at prices below 79 cents over the next few days. There is probably no urgency for this so we would try a ‘scale-down’ buying campaign from 79 cents to 77 and a half, which is where the support from the old weekly compression ends. Charts: