[Premium] Cotton On The Verge Of A Breakout

JC Parets
August 4, 2018

We're witnessing yet another breakout attempt in the commodities market, and this time it's Cotton. This post is going to take a look at the setup, how it may develop, and how we can take advantage of it.

Structurally, Cotton is attempting a breakout from a 5-year base after consolidating just below all-time highs for the last 2 months. Prices closed just at our risk management level, so it's best that we wait for an additional weekly close above 23,750 to confirm a breakout that would target 29,815.

Here's a look at the daily chart showing a gap up to new all-time highs, while momentum diverged negatively and prices closed back below their 2016 highs. That along with prices being extended from their 200-day moving average suggest a gap fill, either partial or fully, may be in store before prices move back to all-time highs.

Patience here is best so that we can avoid buying a failed breakout like we saw over the last few months in Commodities like Crude Palm Oil.

...and Copper.

The Bottom Line: There aren't many intermediate-term long opportunities in the Commodities market where the reward/risk is skewed in our favor, but Cotton may be setting up as one. Given the prevalence of failed breakout attempts in the space, it's best we remain patient and look to buy a second weekly close above 23,750 with a target at 29,815.

Thanks for reading and let us know if you have any questions.

Allstarcharts Team

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