The Cotton prices are under pressure. The cotton futures contract traded on the Multi Commodity Exchange (MCX) has tumbled about 3 per cent so far this month. It is currently trading at ₹20,450 per bales. Good progress this season in the area covered under cotton coupled with the higher inventory levels and weak export demand are keeping the commodity prices under pressure.

Outlook The near-term view for the MCX-Cotton futures contract is bearish. Cluster of moving average resistances in the band between ₹20,800 and ₹20,900, has been capping the upside in the contract over the last one week. Immediate support is at ₹20,350 – the 38.2 per cent Fibonacci retracement support level. A break below it can pull the contract lower to ₹ 20,175 – the 200-day moving average support immediately. Further break below ₹20,175 will enhance the downside pressure and increase the likelihood of the fall extending to ₹20,100, ₹20,000 or even ₹19,950 – the 50 per cent Fibonacci retracement support level. This broad ₹20,100-₹19,950 region seem to be a strong support for the contract. An immediate break below this support zone looks less probable. An upward reversal from the ₹20,100-₹19,950 support zone may have the potential to take the contract higher to ₹20,700 and ₹21,000 levels once again.

But if the contract declines below ₹19,950, it can come under renewed pressure. Such a break will increase the likelihood of the contract extending its downtrend to ₹19,500 thereafter.

The region between ₹21,200 and ₹21,500 is a strong resistance zone for the contract. A strong break and a decisive weekly close above ₹21,000 will be the first sign of a trend reversal. In such a scenario, the possibility will increase for the contract to breach above ₹21,500 and rally to ₹22,000 and ₹22,100 thereafter.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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