Technical Analysis

We are pleased to introduce a dedicated Technical Analysis section to the GSX Weekly Research offering. Designed to complement our fundamental market commentary, this new addition provides deeper insight into market trends, key price levels, and potential trading scenarios, helping clients develop a more complete view of commodity market dynamics.

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Coffee continues to trace out a long-term wave (C) down, with the potential to retrace much of the upside built over previous years. We currently have KC as within an impulsive decline forming part of the macro wave (C) lower. Recent weeks have produced a bounce of sorts, reclaiming above the 200WMA. For more on the tactical considerations, we zoom in to the daily chart.

Having reached our 254 target region, a rally of sorts has now developed. There is a good chance this is the wave (iv) we have awaited in prior commentary, which should play out over the coming couple of weeks and target the 280–300 area. Price remains within the downtrend channel pictured; a break above this channel would place us pretty firmly in wave (iv). Should KC then blow through the red resistance box at the 280 region, we could consider wave (v) as complete and would need to change tactics for a larger rally — though this is not yet our base case.

Note that the gap up is due to CT’s contract roll this week. Some upside is evident in cotton futures as we trade within the target region of 70. There is still nothing conclusive to consider wave 2 complete for this multi-week downtrend; however, this is where we need to remain vigilant for a trend reversal.

Drilling down to a 4-hour chart, cotton continues drifting around the 70 target region; however, there is no sign of a micro five-wave move up. This is required before we can consider a bottom for wave 2 at the 0.618 retracement. One alternate scenario is that this is wave (a) bottoming, with a (b) and (c) still to follow to complete wave 2 — quite a bit less probable, but worth putting on the radar. For now, we need to see a short-term five-wave move up to consider wave 2 complete, and expect a strong, multi-month rally in macro wave 3.