Live Cattle
It was a wild day in the June Live Cattle contract on Wednesday, April 4, 2018. It gap (Tuesday low – 99.55 to Wednesday open – 98.925) opened lower and broke down below support (97.375) making another new low for the move at 97.075. It reversed direction from here and soared. It closed the gap and consolidated and then took off, going up limit (102.625 high), before dipping at the end of the session and settling at102.325. It formed a Bullish Engulfing Candle and after the steep decline it had, could signal a retracement higher is coming. Aggressive traders can buy a break out above the Wednesday high looking for price to test the 104.20 to 104.85 resistance zone. Conservative traders could wait for a pullback to the middle of Wednesday’s range (99.85), look for a setup to get long and look to get out on a rally towards resistance at 101.55, 103.00 and then the resistance zone. Place stops according to your account size and risk tolerance. Negotiated cash trade on Wednesday was very light on light demand in most major feeding regions. Wednesday afternoon boxed beef cutout values were lower on Choice and sharply lower on Select on light to moderate demand and moderate to heavy offerings. Choice was down 1.49 at 218.19 with Select down 3.15 to close at 206.18 on 169 loads. The choice/ select spread widened to 12.01.The hide and offal value from a typical slaughter steer for today was estimated at 9.96 per cwt live, down 0.11 when compared to Tuesday’s value. Estimated cattle slaughter for today is 118,000, last week 118,000 and a year ago 115,000.
Feeder Cattle
The May Feeder Cattle contract also gap (Tuesday low – 130.80 to Wednesday open – 130.525) opened lower and broke down to another low for its down move. It broke down below the 129.65 support level and made the low at 128.875. It closed the gap and fell back, before racing to the high of the day at 135.475 which just happens to be limit UP! It couldn’t settle up limit and dipped to close at 135.125. It formed a Bullish Engulfing candle and with the decline Feeder Cattle had, a short covering rally could take place. Trade Idea – Buy 1 May 140 Call and sell 2 May 125 Puts for even money. Cost will be commission and fees. Get out if Feeders make a new low.
Lean Hogs
The June Lean Hogs contract Traded to a new low (70.25) for the down move, stopping just above support at 70.125. It recovered with the cattle markets and raced higher, taking out resistance at 72.875, reaching 73.775 for the high. It pulled back to settle at 73.275. It formed an Outside Day Candlestick. Aggressive traders could buy a break out and look for price to test resistance at 75.625. If price can’t hold a rally, consolidation within the Wednesday range is likely.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, March 29th at 3:00 pm. 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.
**Call me for a free consultation for a marketing plan regarding your livestock needs.* *
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.