Sunday, June 10, 2012

Cotton Surges "Limit Up" For Second Consecutive Day

Our soft commodity flavor-of-the-month, cotton, has seen its near term futures surge "limit up" for the second day in the row.  Was our case for cotton perfectly timed for once?  (See: Cotton's Blue Light Special)
Cotton futures price chart 2012
Cotton's sharp reversal sent shorts running for cover. (via Barchart.com)

While there have been additional acreage reductions announced in the past week, this sudden rally is being attributed to fast and furious short covering.  I'd hate to be short any commodity in a secular bull market, let alone when Bernanke has a microphone in front of him!

We'll keep an eye on a potential breakout - I prefer to see a 20-day high, at least, when entering a cotton position, and this didn't get us there.  Which is fine, as I also hate to trade V-shaped moved in the softs - they rarely happen.  I would expect the trend in cotton to remain sideways to down for a bit, with the potential for stimulus-driven swings.

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