That is an acceptable way to hold them, but baby cottontails are extremely high stress animals, and can die due to being overly stressed, so please don't pick them up. They're very afraid of humans.
Actually, speaking as a vet nurse in training, I can tell you that's nothing more than a myth. In reality, hardly any animal species will reject their young for smelling like humans, and more deaths are actually caused by humans holding animals that have skin sensitive to the oils our hands produce :(
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