From the Desk of Ian Culley @IanCulley
Forget about what Powell said or whatever you heard on the street.
We’re still looking for risk assets to buy.
That includes stocks and commodities. Despite the dollar applying downside pressure to risk assets this morning, I want to share one commodity that looks ready to rip…
Check out the weekly chart of Cotton futures:
Cotton experienced a sharp decline last year following an impressive run-up off the 2020 lows. Fast forward to today, and it’s challenging a critical retracement level from below at approximately 89.
The bulls have hammered this level since October of last year. And the way I learned it…
The more times a level is tested, the higher the likelihood it breaks.
I want to catch a breakout in cotton above 88.30 in the March contract with an upside objective of 114.50 (Note: cotton is set to roll to the May contract based on volume next week).
Regardless, it’s always a good strategy to trade the most active contracts. This is especially true for more thinly traded ones such as cotton. So I’ll stick with the March contract until trading volume dictates otherwise.
To be clear, we have no business trading cotton futures from the long side until we see a decisive upside resolution. Until then, our bias remains neutral.
That’s it for today – just a quick and dirty trade idea!
It’s simple. The market continues to reward us for finding stocks and commodities to buy. So that’s what we plan to do.
Stay tuned!
CFTC did not release COT reports this week. We will update the data next week once it's available.
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