COTTON breaks below key technical support level

Cotton (COTTON) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team


COTTON breaks below key technical support level
COTTON closes lower for the 3rd day in a row
COTTON closes within previous day's range after lackluster session


Moving lower for the 3rd day in a row, COTTON finished the week -1.1% lower at 57.61 after losing $0.45 (-0.78%) today. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range in a lackluster session.

Daily Candlestick Chart (COTTON as at May 22, 2020):

Daily technical analysis candlestick chart for Cotton (COTTON) as at May 22, 2020

Friday's trading range has been $1.15 (1.98%), that's far below the last trading month's daily average range of $1.72. Weekly volatility is also lower, being below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for COTTON.

Prices broke below the key technical support level at 57.98 (now R1), which is likely to act as resistance going forward. The last time this happened on Monday, COTTON actually gained 2.42% on the following trading day.

Although the contract is experiencing a short-term uptrend, this could just be a correction, as both the medium and long-term trends are still bearish.

Selling might accelerate should prices move below the nearby swing low at 56.80 where further sell stops could get triggered.

Among the three market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "3 Consecutive Lower Closes" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for Cotton. Out of 155 times, COTTON closed higher 58.06% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after nine trading days, showing a win rate of 52.26% with an average market move of 0.16%.

With four out of the other five Consumer Commodity Markets closing lower today, the ones that stand out on the negative side are COFFEE losing -1.1% and LUMBER closing -0.68% lower. On the flipside the best performer has been COCOA closing 1.88% higher. Read more

Market Conditions for COTTON as at May 22, 2020

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