Market Overview

Six More Bullish Signs For Cotton ETN


One of the most popular songs from one of Australia's finest exports, AC/DC is “Back in Black.” Well, cotton is white, but it is certainly back with a vengeance after a February tumble that saw the iPath DJ-UBS Cotton TR Sub-Index ENT (NYSE: BAL) slide from over $110 to just over $90.

BAL, one of the more volatile commodity ETNs out there and that's saying something, has been on fire, since rebounding to close over $106 on Wednesday.

Looking at the chart, the February slide is now a higher low. Bullish sign #1. ETF Trends smartly noted that cottons slide was due to a broader market sell-off, not a change in cotton fundamentals. Bullish sign #2.

Various sources recently pointed out that China's domestic cotton production (estimated at 30 million bales) will not be able to meet expected consumption (estimated at 47 million bales). Bullish sign #3.

Even Warren Buffett acknowledged rising cotton prices as having an impact Hanes Brands, which is owned by Berkshire Hathaway (NYSE: BRK.A, BRK.B). Bullish sign #4.

Cotton for May delivery was limit up on Wednesday for the fifth consecutive day and is closely in on the Feb. 18 all-time high of $2.0893 a pound. Bullish sign #5.

Want more? From Bloomberg News: Cotton buyers have purchased more than 80% of the coming harvest from Australia, the fourth-largest shipper, stepping up the pace of advance sales as a shortage pushes prices to a record. Bullish sign #6.

It may hard to be bullish on a triple-digit ETN that has nearly tripled in the past year, but if one is going to feel that way, BAL is the ETN for those sentiments.

Posted-In: Long Ideas News Technicals Commodities Intraday Update Trading Ideas ETFs


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