Another potential contrarian play is setting up in US Cotton No.2. The Cotton ETF (iPath DJ-UBS Cotton TR Sub-Index (NYSE:BAL)) has looked horrible since the beginning of May. After a leg lower to 52 it consolidated for a month before making another leg down. It has reached the Measured Move lower now and is consolidating again. With this leg and consolidation though the RSI has moved into the teens and held there for a week. Perhaps it is just too oversold.
For the aggressive trader a long bet against a stop at Last Friday’s low may get you stopped out or in at the bottom for a ride higher. For the more conservative crowd, keep watching and listening to Lead Belly until you see a new closing higher over 46.35. Then pick your bale of cotton.
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