February 21, 2008
I am still long cotton and still very much a buyer. After bottoming last year, then consolidating (painfully for me) the past seven months, I believe it immediately has an incredibly bullish look.
Soybeans are at $14.00, Wheat between $10.00 and $15.00, and Corn is just over $5.00. All of those are MAJOR new all time highs...Even so, with last year's 16 cent rally, Cotton is still 40 cents below it's $1.15 cent high made in 1995.
Cotton lost about 30% of its USA acreage last year due to farmers shifting to other higher paying crops (all of which are SIGNIFICANTLY higher this year)...which resulted in that 16 cent rally...I would not be surprised to seeing an even greater contraction in cotton acreage in the coming growing season, and with it, an even bigger cotton bull move than we saw last year.
Nothing is absolute in this business, especially technical analysis, and there is nothing that says cotton cannot turn around and go straight back down from here, but for my money, the cotton chart you'll find below looks like it could be at 90-95 cents in relatively no time at all.
I'll try to get myself to write more on the subject tomorrow, but it's 10:00 PM and I just want to get this in front of anybody who even remotely believes in chart based trading...As I said before, charts are definitely not infallible, but (as drawn on the chart) I see a virtually perfect ascending triangle and a monstrously bullish looking breakout...
I am buying both the May and July contracts, using, as always, units of two calls and one put.
Take a look for yourself...Give me a call if you want to know more.
Two calls and a put will cost about $3600 per "unit".
I wanted to address a few personal trading rules/observations I have posted on my office walls that I think are pertinent here...But it's late, so I'll just include them without comment...Take them for what they are worth...
One good trade is all it takes...Try to wait for it to appear.
The best way is going with it...Which way is the market pointing you?
If you are not willing to buy both sides (2 & 1), do not do the trade...
(I say cotton is about to be at 90...or back at 68)