GIL having a solid day today – up 3%, which we think is a function of the fact that Cotton is down by 4.9% today, and is off 22.3% since its Nov 12th peak.
It’s going to take a LOT more than a 22% swing in cotton in order to ease pressures building in the supply chain for GIL and its peers (a number below a buck). But nonetheless, the company reports its 4Q next week, and is likely to say and do whatever it can in order to finish off the year on a positive note. Having a recent slide in Cotton – even from what might have been a false top – adds fuel to the fire for GIL. They’ll probably leave out what most of its peers have as well…that at $1.22, Cotton is still trading 3-Standard Deviations above its 20-year mean.
Keith is short GIL in the Hedgeye portfolio, and the critical levels from a risk management perspective are TRADE = $27.79, and TREND = 28.99.