Cotton prices are falling again, and one trader thinks the decline has further to go. Jim Wyckoff, writing for Barchart, says December cotton (CTZ26) futures offer a selling opportunity after hitting a four-week low.
Wyckoff’s argument rests on a chart. He points to the daily bar chart for December cotton futures, where prices are trending down and have just touched a four-week low. At the bottom of the chart, the moving average convergence divergence (MACD) indicator shows a bearish posture: the blue MACD line is below the red trigger line, and both lines are trending down.
“The bears have the near-term technical advantage as the trend is now their friend.”
That is a trader’s way of saying the numbers favor selling over buying.
Why Cotton Is Falling
The chart tells part of the story, but Wyckoff also cites fundamental forces pushing cotton down. Weak global demand for U.S. exports, especially from China, has pressured cotton futures prices. Consumer apparel trends have moved more toward synthetic fibers and away from cotton.
The Sell Target
Wyckoff sets a specific target for sellers. A move in December cotton futures below this week’s low of 83.68 cents would become a selling opportunity. The downside price objective would be 72.00 cents, or below.
He also offers a protective measure for anyone who enters the trade. Technical resistance sits at 88.50 cents, and Wyckoff recommends placing a protective buy stop just above that level.
Risk Warnings
Wyckoff spends considerable space warning readers about the dangers of trading. He quotes the Commodity Futures Trading Commission (CFTC) directly, noting that trading commodity futures and options is “not for everyone” and that it is “a volatile, complex and risky business.”
He also makes clear that he is not a futures broker and does not manage any trading accounts other than his own. His role, he says, is to point out potential trading opportunities, leaving the decision to enter and the size of any trade entirely up to the reader.
What Wyckoff Does Not Hold
On the date of publication, Wyckoff did not hold any positions in any of the securities mentioned in the article. That disclosure matters because it removes any conflict of interest from his advice.
All information and data in the article are solely for informational purposes, and the article was originally published on Barchart.com.
The Bottom Line
The advice is straightforward. Wyckoff sees a bearish chart, weak fundamentals and a clear path down.
The warning is standard language for the industry, and it is placed before the trade idea, not after it. Wyckoff is doing his job as a trader who wants to share ideas without owning the positions himself.
Source material: “1 Trade to Make Now as the Weakness in Cotton Prices Continues,” Yahoo Finance.
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