Live Cattle
The June Live Cattle broke down from the open (124.975) on Wednesday, May 10, 2017, trading down to the low of the day at 122.225 then grinding higher to the high for the day at 125.125. The low is near the 50% retracement (121.61) of the rally from the April 5th low at 108.675 to the May 4th high at 134.55. The session formed a Dragonfly doji candle indicating indecision in the market. The formation of the candle could indicate the June contract may be ready to test resistance levels. If the June contract can sustain a rally above the Wednesday high, a test of resistance at 127.15 is possible. Support is at the 38.2% retracement level at 124.65 and then 123.30. The fedcattleexchange auction took place today with 1,993 cattle for sale. 1,287 cattle were sold with a price range of $137.50 to $140.00. There was one sale at $132.00 for 17 to 30 day delivery. This is approximately $8 lower than last week. After the auction Cash trade lightly with sales in Kansas at $138.00 and dressed sales in Nebraska at $224.00. Boxed Beef cutout values were higher on moderate demand and light offerings. Choice cutout value ended up $2.42 higher at $244.58 and Select Cutout value was up $1.59 at $224.62.
Feeder Cattle
The August Feeder Cattle contract gap opened (150.85) lower and traded down to the low of the day (147.32). It then staged a sharp rally, making a new high for the day at 151.075. The low is just above the 38.2% retracement level at 147.23. The session formed a hammer candlestick and this could set up a rally to resistance. A rally above the high could lead to a test of resistance at the Tuesday low (152.15), which would close the gap that was created from Wednesday’s trade. A failure from here could see a retest of the 38.2% retracement level.
Lean Hogs
The June Lean Hogs tested resistance at 77.90, reaching a high at 77.95 on the open and then trading down to the low at 76.775. It consolidated for the remainder of the day and settled in the middle of the range at 77.20. Hogs could continue to consolidate around the 77.90 level before breaking out to its next level. Resistance is at 80.45 and 82.375. Support is at 76.025 and 74.40.
For those interested I hold a weekly livestock webinar on Friday, May 12 at 3:00pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109
www.walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.