Cotton : Interesting technical short term configuration (BAL) – 09/08/17

We include in our watchlist the ETN Ipath Cotton (BAL), which presents an interesting technical short term configuration. In the longer term, structural threats could weigh negatively on prices. BAL incurs a fee of 0.75% with a limited liquidity of c. $10m.

China, the world's second-largest producer behind India, has decided to sell 3.75 million tons of its cotton stocks in 2017. But price increases have prompted US farmers to invest in cotton and their production could increase by 12% 2017. In addition, China, the world's No. 4 GMO cotton, wants to expand the field of transgenic crops and the purchase of the Swiss Syngenta by the state-owned ChemChina company is going in this direction.

The technical configuration of BAL is attractive. On the monthly chart, there is a long-term trend that remains positive despite high volatility, with moving averages and MACD being well oriented. In the short term, we see that a recovery is taking shape. The prices arrive on a resistance formed by the short term moving averages. In case of overrun, a strong positive pulse is possible.

BAL : monthly data

BAL : weekly data