The information and opinions expressed below are based on my analysis of price behavior and chart activity
December Live Cattle
The December Live Cattle contract finished the day up 0.62 at 185.40, roughly in the middle of the range today. They started off firmer in reaction to the election results, jumping to 186.60 and setting new highs for the week in the first 10 minutes of trade, but had given up those gains before 9:00 AM. As I think you can see from the chart above, for most of this year this market has been in a slightly downward trending range as highlighted by the blue lines. Today that range extends from about 188.35 on the high side to 172.35 on the low side. Prices certainly appear to be near the high end of that range and if they mimic what happened at this time last year, the market may be in for a sharp decline. This chart cuts off or starts in November of ’24, so you may get an idea of what I mean. The 50 day moving average (purple, 184.57 today) has seemed to offer some support over the past 4 sessions and the 100 and 200 day average are both near the 183.75 mark which may offer some potential support, in my opinion. However, to my eye, this market is not one that usually trends “nicely” for the most part. Cattle trade can be quite volatile. You may notice there are many wide-range trading days on the chart and lots of extended wicks on the candlestick charts and when the prices decline, they seem to do so very quickly. The midrange level on the blue channel line is near the 180.50 level, and while that is about 5.00 away from current prices, you’ll notice that the declines in March, late May to early June and then early August covered that ground, and then some, in just a few short days. Producers that are worried about that price risk may do well to consider the December 180.00 put options, which closed today at .75 or $300 plus commissions and fees. Those options expire in 30 days. To my eye, that seems like a very reasonable price to play for fat cattle you may be bringing to slaughter in the next month or so. Aggressive and very well margined futures traders may do well to maintain short positions, but do so within your capitalization and risk tolerance levels. If those ideas don’t meet with your time frame or risk tolerance, please reach out directly to us here at Walsh Trading and we can craft a risk management solution tailored to your specific situation.
Jefferson Fosse
Senior Account Executive
Walsh Trading
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