Another common short term technical indicator is the daily price open, high, low, and close relative to previous days. Typically this latter information is used to derive so called “pivot points” (e.g., the average of the previous day’s high, low, and close), which in turn are used to calculate expected primary, secondary, and tertiary resistance and support levels. There is nothing magical, theoretical, or intrinsically predictive about these calculated resistance and support levels other than that they are commonly employed by traders, which includes some very large speculative index funds. Both speculators and hedgers use calculated support/resistance levels to place buy/sell stop orders to exit their positions and limit their losses if the market goes against them. This predictably leads to concentrations of stop orders around certain price levels.The local floor traders at the NYBOT then make a practice of running the market up or down to trigger suspected batches of stop orders, thereby briefly extending the market move, and taking profits on their day trades. This phenomenon explains much intra-day market movements in cotton, and actually benefits hedgers in providing a lot of daily market liquidity. The disadvantages (to a hedger) are that your protective buy/sell stops might be triggered for these non-supply/demand reasons.
Welcome to the educational website of Dr. John Robinson in the Department of Agricultural Economics at Texas A&M University.
The website focuses on farm-level implementation of strategies for Texas cotton growers to deal with yield and price risk. Contact me to receive a weekly e-mail notice of when the latest edition is posted on-line. In addition, we provide daily crop market news and commentary on Twitter (@aggie_prof) and also on the Master Marketer facebook page. We welcome your feedback and interaction in these social media.