Cotton has been on an impressive up move since mid 2010 appreciating over 150%. However, we are starting to see some signs of a possible h&s top forming. The above chart shows the LS, H, and RS have all formed. We are now just waiting for confirmation, which would be a close below the red neckline. A mini double top formed and was confirmed yesterday. This formation projects down to around 183.00. If the h&s formation gets confirmed the objective is down to around 151.50. The LS was formed with an engulfing pattern, the H formed with a shooting star, and the RS formed with a piercing line. All reversals were confirmed with bearish candlestick patterns and shows stiff resistance up at these levels. We also saw some divergence on the RSI between the LS and H. Finally we got a bearish crossover on the MACD soon after the H was formed and have gotten back to back closes under the 10 and 20 DMA's. We do face some possible support at the rising window just above the neckline. Let's see if we can get a close below this area. If so, the 50 DMA will be the next area of possible support as it also coincides with the double top objective. I would expect a bounce at this area and a retest of the upward sloping neckline.
