Chart of the Day – June Live Cattle
The information and opinions expressed below are based on my analysis of price behavior and chart activity
June Live Cattle (Daily)
June Live Cattle finished the shortened trading week today, gaining 2.000 to settle at 204.075. After the close, the April Cattle on Feed data was released. According to the USDA, the total number of Cattle in the US is 11.638 million head, 98% of last year, with Placements pegged at 105% and Marketings at 101. I’m not sure any of those numbers are dramatic enough to change a trend. But we do say “buy the rumor and sell the fact” for a reason, so it will be interesting to see how everyone else views it after a three-day weekend. From a technical point of view, the market appears strong to me. There have been 5 straight days of gains, going back to last Friday, with today’s trade filling a gap that had been left on the chart earlier this month (Apr 3-4, at 203.700). Sometimes, when price gaps are filled, that can be a catalyst for a trend reversal, in this case back down, but the market had opportunities today to fail and did not. Perhaps, that happens next week. It’s oddly coincidental to my mind that the gap-filling price action and the newest COF data occurred on the same day. The 5- and 10-day moving averages (blue, red, 200.365 and 198.140, respectively) did make a bullish crossover with Wednesday’s trade, which I view as supportive. If the market remains strong, I would expect a push to the grey trendline (roughly 209.200 on today’s chart) which would eclipse the April 2nd contract high of 207.725. Trade volume has not been huge this week, compared to the sell-off volume earlier in the month, but it still seems like the up days have been getting increasing volume over the past two sessions. Open Interest has declined in the June contract since the contract highs on April 2nd, but it’s been coming back up this week. The Stochastic RSI indicator is above the midrange and still pointing higher. The price trend is up, the herd is still contracting and retail demand remains strong. As long as those conditions persist, I’ll remain bullish Cattle. Seasonally, prices typically drop in April, but this year may be an exception.
June Live Cattle (Weekly)
For the week, the June Cattle contract gained 7.275, adding 3.7%. The weekly June Cattle chart indicates to me that we’ve had some greater price volatility since the trend turned up in Aug-Sept. The larger weekly ranges may be an effect of June becoming the “front month” and perhaps a few more market participants. You might notice a couple of grey trendlines on the chart above. The upper one is drawn off the Jan-Mar highs and the lower off of the Sept-April lows. For now, the market seems content to remain in that trend channel. The low end was tested in early March but the market recovered to close above what would be that trendline. The 5-and 10-week moving averages (blue, red, 301.340 and 197.207, respectively) are trending higher and should offer support levels, should the Cattle retrace. The 50-week is down at 186.399 (green) and also trending higher, although the line has only a slight inclination right now. Producers that are concerned about hedging, should likely do so in the Options, in my opinion, only protecting their most imminent needs, as the trend is still up at this time.
Jefferson Fosse Walsh Trading
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