* Open interest highest since Feb 2011
* Liquidity moving out of March into forward contracts
* With stock rise, China holiday looming, prices may be due
NEW YORK, Feb 1Cotton prices rose again on
Friday as speculative buying outpaced merchant selling and
extended fiber's rally to a fifth straight week, its longest
since its 2011 bull run.
The most-active March contract on ICE Futures U.S.
rose 0.03 cent, or 0.04 percent, to settle at 82.98 cents per
lb, after hitting an intraday high of 83.45 cents.
"The battle between spec longs and trade shorts has turned
more even this week, as the market yo-yoed back and forth in
volatile fashion," said Peter Egli, director of risk management
for Plexus Cotton Ltd, a British-based medium-sized merchant.
The size of the gains this week were not as dramatic as last
week when March prices hit seven-month highs of 84 cents per lb,
but the hedge funds' bullish bets propelled the fiber to its
longest winning streak since its early 2011 bull run.
The market's failure to take out 84 cents was seen as a
minor victory for the bears, he said.
With certified stock rising, index fund rolling their
positions forward, futures remaining above cash prices and the
Chinese Lunar New Year holiday fast approaching, the odds are in
favor of a correction.
"From a technical point of view, the market has started to
flag sideways, and this congestion pattern will soon be resolved
by March either taking out the 84 cents high or by breaking
below a near-term uptrend line that runs through around 82.30
cents at the moment," Egli said.
Even so, further forward prices all touched new eight-month
highs this week and open interest has continued to rise, hitting
their highest level since the market's last bull-run.
The number of outstanding contracts rose by just over 3,200
lots on Thursday to 208,681 contracts, its highest level since
February 2011. A month later in March 2011, prices peaked at
$2.20 per lb, a record since the U.S. Civil War in the 1860s.
Liquidity in the March contract has already started to fall
ahead of first notice day next Friday when the U.S. Department
of Agriculture will publish its monthly crop report and March
options expire. Trade is moving into May, July, which is the old
crop, and December, which represents the new 2012/13 crop.
(Reporting by Josephine Mason; Editing by Marguerita Choy)