Cotton rises on technical support, but posts second weekly loss
* May 'flag' could spur bullish speculators -merchant
* Fiber's second weekly loss follows recent gains
* May-March spread widens to biggest since May 2012
NEW YORK, Feb 15 (Reuters) - Cotton rose on Friday as key technical support levels and this week's strong U.S. export data buoyed prices, though the fiber still posted a second straight weekly loss as a recent bull run lost momentum.
The most-active May cotton contract on ICE Futures U.S. rose 0.4 cent, or 0.5 percent, to settle at 83.19 cents per pound.
Friday's gains were not enough to prevent the fiber from sliding about 0.1 percent over the week and registering its second consecutive weekly loss. Prices remained range-bound between recent highs of about 84 cents and technical support levels near 81 cents a lb.
The May chart may be forming a "bull flag," or a pause in upward momentum, said Peter Egli, director of risk management for Plexus Cotton Ltd, a British-based medium-sized merchant.
"The specs recognize this as a high probability pattern and are therefore likely to act on it," Egli said in a market report.
Speculative investors have driven cotton's surge of nearly 10 percent since the start of the year, boosting their bullish bets for five straight weeks to a 2-1/2-year high.
But that recent price surge has been flagging as speculators' optimism for cotton prices met resistance from the trade, with commercial members of the industry increasing their net short position to its highest level since September 2010.
Last week, cotton registered its first weekly loss of the year as readily-available supplies pressured prices. The pressure continued this week as certified stocks climbed to levels not seen since May 2011, reaching about 238,000 480-lb bales on Thursday. Another near 65,000 bales awaited review by the U.S. Department of Agriculture on Friday.
Intraday lows of 81.35 cents on Wednesday and of 81.42 cents on Feb. 7 helped the May contract form a "double bottom" in its chart, which looks "promising" for resuming the upward trend, said Knight Capital cotton analyst Sharon Johnson.
Cotton prices also found support when the most recent U.S. government export data on Thursday showed a significant uptick in sales in the week ended Feb. 7 from the previous week and spoke to continued high levels of demand.
That strong demand provided some counterbalance to underlying fundamentals of a global supply glut.
The spot March contract closed up 0.3 cent, or 0.4 percent, at 81.32 cents per pound.
"We've seen some bullets of energy to get the March contract liquidated down pretty aggressively, some of what we're seeing (today) is a break from that," said Knight Capital's cotton analyst Sharon Johnson.
Trading volumes reached more than 29,000 lots on Friday, well above the 250-day average of less than 19,000, but below volumes earlier in the week.
May overtook March as the most active contract this week. Open interest in May reached more than 121,000 lots on Friday, compared with 28,000 for the March contract.
The May benchmark contract held a steep 1.87-cent premium on Friday, the largest the second-month has held to the spot contract since May 2012.
The ICE agricultural markets will be shut on Monday for the Presidents Day holiday and will reopen for regular trade on Tuesday.
(Reporting By Chris Prentice; Editing by Peter Galloway)