Live Cattle
The June Live Cattle tested support at the 8 DMA (126.77) on Monday, May 08, 2017, gap opening lower and trading down to 126.65, before reversing course and closing the gap, rallying all the way up to 128.725; all in the first 5 minutes of trading. The June contract then broke down and made a new low at 126.05, before reversing and trading to a new high at 128.925. It then backed off, trading to the middle of the range and ended the session at127.55. It formed a spinning top candle, indicating indecision in the market. While the June contract was spinning around, the deferred contracts were playing catch-up. When the June contract was trading up to the highs for the move, the deferred contracts lagged. On Monday they held fast and formed bullish piercing line candles. This narrowed the spreads between the front and the deferred months and held June in check. If the June contract can sustain a rally above the Monday high a test of resistance at 130.05 is possible. A breakdown below the low could see a test of support at 124.75. Expectations are for a larger showlist this week as producers try to take advantage of the big rally in cash prices last week. Boxed Beef cutout values were higher on moderate demand and light offerings. Choice cutout value ended up $2.57 higher at $241.44 and Select Cutout value was up $3.32 at $222.89. The Choice/ Select spread is at $18.55. Estimated Slaughter for Monday is at 115,000. A week ago it was at 107,000 and a year ago at 110,000.
Feeder Cattle
The August Feeder Cattle formed a potentially bullish piercing line candlestick formation, gap opening lower and rallying toward the Friday high (157.275). It settled (156.65) near the high and ate up just about all of Friday’s bearish candle. A rally above the high (156.75) could lead to a test of resistance at 157.80 and then 160.05.
Lean Hogs
The June Lean Hogs grinded higher reaching 77.55 which is just below resistance at 77.90. A breakout above 77.90 could lead to a test of resistance at 80.00 and then 82.30. A breakdown below the low (76.175) could lead to a test of support at 75.325, then 74.475 and 72.875.
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.