* Fall past technical support triggers automatic selling
* Cotton down 4.5 pct over last 3 sessions
* Speculators boosted cotton 18 pct during first quarter
NEW YORK, April 8 (Reuters) - ICE cotton fell 1.6 percent on Monday, with investors seen taking profits as prices fell below technical support and mills hesitant to buy as prices touched a one-month low and notched the largest three-session slide since October.
The most-active May cotton contract on ICE Futures U.S. fell 1.41 cents, or 1.6 percent, to settle at 85.38 cents per pound. The session low was 85.22 cents, the lowest level since early March.
Cotton has dropped nearly 4.5 percent over the last three sessions, as prices fell past technical support levels and triggered more selling.
Automatic sell orders kicked in when cotton fell past a recent low of 86.12 cents a lb. On Friday, prices settled below the low point of a flag formation at 86.59 cents a lb.
Last week, cotton fell below a technical support level at the 14-day moving average, which dealers said prompted further selling this week.
During the first quarter, cotton rose 18 percent as speculators invested in the fiber, but the upward momentum has stalled since last month, when prices climbed to a one-year high of 93.93 cents.
The noncommercial dealers still hold a large bullish stance in cotton futures and options, though they have dialed that position back from a five-year high seen last month, according to government data.
“You’ve got outright selling and limited, scaled-down buying. The mills will wait for evidence of some sort of a low before buying,” Knight Capital’s cotton specialist Sharon Johnson said.
Demand and strong prices in the cash market had been supporting cotton’s recent rally, with recent sale and shipment levels being seen as strong.
Traders pegged physical support for the futures market in the 83-to 85- cent range and technical support at around 81 cents.
Prices felt further selling pressure amid the index fund roll on Monday, as open interest moved out of the spot contract.
The July contract closed down 1.31 cents, or 1.5 percent, at 87.26 cents a lb.
The U.S. Department of Agriculture is set to release its monthly crop report on Wednesday. Last month, prices rose after the agency cut its forecast for global stocks, citing higher consumption.
The world is forecast to see a record global surplus by the end of the crop year through July.
Prior to its 2013 gains, fiber posted two years of losses as lower-priced alternatives eroded demand for fiber and global reserves grew. (Reporting by Chris Prentice; Editing by David Gregorio)