Has the Trend Cot(t)On?

JC Parets
July 1, 2021

Earlier this week we shared a couple of trading ideas in the Commodities space. While Cotton as a commodity continues to shine through, we're seeing some movement in the related stocks as well.

Today we're here to connect the dots and see the impact of the rise in commodity prices on the related stocks.

So let's dive in!

Cotton has been positive in the recent past and has been achieving its targets. What we're seeing right now is an almost 8-year base breakout in the commodity! You can see the clean move and breakout on the monthly chart below. With that said, the long-term trend of this commodity will remain positive so long as it trades above the level of 24,225.

The next target to track would be near 30,000.

Click on the chart to zoom in.

So if the commodity is performing well, there must be certain stocks that must reflect this strength as well, right?

Right! We were going through some names that would require cotton as raw material and would benefit from this move. Some names have been showing strength and we thought this was a good time to share a couple of ideas.

Here's a look at Nahar Spinning Mills. The breakout in this stock has been swift. It moved past its overhead resistance of 178 with ease- on its fourth attempt- and is quite close to its next target. For those invested, the next level to watch out for would be 274.

For those looking to buy in, corrections can be used to initiate position as long as the price remains above 178.

Up next is a name that has a favourable risk/reward ratio from current levels. Nitin Spinners is another stock that broke out of a big base as did cotton. Here, the price absorbed overhead supply at the level of 140 and is displaying strength. This strength that we're referring to is both absolute and relative; always great when that comes through!

We are bullish above the level of 140, with a target just above 210.

Recently, when metals went on a rampage, we saw the related stocks outperform the market. Now that Cotton is showing leadership, why should this trend be any different?

What are some other cotton stocks that you're interested in? Please let us know, we love to hear from you!

Allstarcharts Team

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