February 3, 2005

Buy Cotton

Do I  know what is going to happen with Cotton? Obviously, the answer is "absolutely not".

What I do know is best represented by the two charts following.....that Cotton is far below the range of prices it usually trades in, also that it generally doesn't spend much time at these levels.....I also know that Cotton, like most commodities, does not generally sit in one place for long. It is either on its way up, or down.....IT MOVES.

I have NEVER seen a market at abnormally low prices that was accompanied by anything other than very bearish fundamental opinion. EVERY commodity I have ever seen at abnormally low prices, and a "buy", has been fairly drowning in supply of that commodity with predictions of rising prices being virtually nonexistent.....   The case is no different right now with Cotton. We have just come through an excellent harvest and there is no shortage of the commodity, which everybody knows. What is unknown, however, is how strong demand will be (from China, for example) or what events may take place to impact future supply (reduced acreage, or poor weather, in the crop to be planted this spring).

I may be dead wrong, and if so, you could lose money on the idea, but I believe Cotton has tremendous potential from here. My perspective is to own it now, and continue to own it, most likely throughout 2005, looking for a minimum of 20 cents on the upside. As I pointed out several days ago, for the past 30 years, between now and expiration of the July contract, July Cotton has had an average range of about 20 cents a pound (one cent = $500 on a futures contract), just . I don't think this year will be any different and I want to be in Cotton NOW.

On the two 30 year charts below, take a look at where Cotton is relative to its 30 year history, and also note the NUMEROUS and quite dramatic moves that have taken place in this commodity.

                            Each one cent move = $500 per futures contract

                                Each one cent move = $500 per futures contract

If looking at charts is like reading Greek to you, just look at it this way: At least 90% of the price action in Cotton for the past 30 years has taken place above today's prices....

For more specifics on this trade, click here to see our January 31, 2005 newsletter.

Call me if you want to know more...There are a number of ways to go about doing this.

Thanks,
Bill Rhyne
800-578-1001
770-514-1993