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Cotton: What Corrective Wave Patterns Tell You About Trend
Elliott Wave International discusses a recent corrective pattern in cotton futures and its implications for the trend.
By Morgan Lee
Take a look at this market chart of cotton futures – specifically the price action beginning on Jan. 23. Does this chart pattern appear corrective or impulsive?
If you know much about the Elliott Wave Principle, you would probably say – even with just a quick glance – corrective. This market displays several short waves that overlap each other without covering a lot of price territory.
And corrections, by definition, are subject to complete retracement once the trend resumes. Isn’t it a lot easier than trying to decipher cotton’s trend by reading something like this?
“Cotton fell the most in a week on speculation that U.S. exports may rise less than the government forecast, leaving more unsold supplies.” (Bloomberg, Jan. 31)
The same article goes on to state that cotton’s future is entirely dependent upon supply and demand, particularly in China – the world’s largest producer of the commodity.
With Elliott wave analysis, however, you don’t have to worry about what’s happening in China to see what could happen with U.S. cotton futures. For instance, tonight’s (Feb. 1) Daily Futures Junctures examines the cotton market and sees important moves ahead – all without ever mentioning China:
“The rebound from the January 23rd low looks quite corrective…”
To find out what exactly "corrective" means for prices in the coming days and weeks, sign up for a risk-free 30-day subscription for our Futures Junctures Service; details are below.