Live Cattle
The June Live Cattle contract made another new high on Thursday, April 20, 2017. It traded above the 61.8% retracement level (116.56) of the move from the January 19th high (121.45) to the April 5th low (108.675), reaching 117.475 which is just below resistance at 117.825. The failure at resistance led to a collapse in price to the session low at 115.80. Live Cattle recovered from the low, staging a late day rally to end the session in the middle of the day’s range. It settled at 116.475, formed a Doji candle (which indicates indecision), and with the failure once again at the 61.8% retracement level, could signal a potential short term top in the market. If the June contract trades below the Thursday low, a test of the 50% retracement level (115.0625) and then the 100 DMA (114.90) is possible. The 8 DMA (114.875) is nearby and the 50 DMA is at 114.625. The 38.2% retracement is at 113.55. The 8 DMA is ready to cross above the 100 DMA which could be another bullish indication. If the market rebounds and takes out the Thursday high, at test of resistance at 118.50 is possible. Trendline resistance is at 119.40 and the Jan 19 high is next.
Feeder Cattle
The May Feeder Cattle also staged a strong early rally, testing resistance at 143.20 as it reached a high of 143.00 before failing and trading to the low of the day at 139.625. It spent the remainder of the session consolidating and settled near the low at 139.75. I think longs started lightening up in front of Friday‘s Cattle on Feed report. The Cattle on Feed report comes out after the close and is expected to show:
Cattle on Feed – 99.7% Range – 98.7 to 100.5% of April 2016
Placements – 106.5% Range – 1101 to 109.5% of March 2016
Marketings – 109.4% Range – 108.1 to 110% of March 2016
Trading below the Thursday low could send price down to test support at the 8 DMA (138.775) then the 13 DMA (136.10) and then 135.225. A rally above the Thursday open (141.10) could see price test resistance at 143.20 and then 144.175.
Lean Hogs
The June Lean Hogs broke down below the 70.00 support level, trading down to 68.55, the low for the day. It rebounded ever so slightly to settle at 68.675. A continuation to the downside could test support at 67.90 and then the 100 DMA at 67.35. Support then comes in at 66.575 and 66.025. A rebound off the Thursday low could see a test of resistance at 70.00 and then the 50 DMA ( 70.775).
For those interested I hold a weekly livestock webinar on Wednesday, April 21at 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.