In today’s technical analysis, let’s take a look at an instrument we don’t often discuss — Cotton. This soft commodity has been trading in a sideways range since May, creating a long-term consolidation pattern visible as a green rectangle on the chart. The upper and lower bounds of this range define clear horizontal resistance and support levels, and price continues to oscillate between them with no decisive breakout yet.
This type of price action is typical of a rectangle formation, where neither buyers nor sellers have full control. For short-term traders, the strategy within such a setup is simple — buy near support and sell near resistance, taking advantage of the repeated bounces. However, for long-term traders, the real opportunity lies in waiting for the breakout that will eventually occur when one side finally gains dominance.
A breakout below the lower boundary of the rectangle would be a clear signal to sell, opening the door for a deeper bearish move. Conversely, a breakout above the upper resistance would be a signal to buy, suggesting the beginning of a new bullish leg after months of consolidation. In both cases, the long sideways movement means the next breakout could bring strong follow-through momentum — so cotton traders should stay alert.