Technical analysis involves trying to predict price movements based on earlier price patterns, calculated support/resistance levels, moving averages, retracements, and other indicators. Technical analysis may have implications for hedgers even though their market entry/exit isn’t as frequent as professional traders. I do not believe that technical indicators are innately or inherently valid predictors of price behavior. But I can think of two arguments for paying attention to technical indicators. First, some suggest that technicals are a leading indicator of new, unfolding fundamental conditions. While that is possible, it is unfortunately not a very testable hypothesis. The second argument for paying attention to technicals is that to the extent that large institutional fund managers act on technical indicators (even in simply placing their buy/sell stops), then those indicators could possibly influence prices in the near term, i.e., in the manner of a self-fulfilling prophecy. As of May 18, the range of typical technical indicators for most active Jul’18 cotton on the ICE, as exemplified here, were mixed.
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.