On Monday, the June Lean Hogs broke down and tested the 50% retracement level (87.0625) of the all-time high (133.425) and the October 2016 low (40.70). It poked through it and traded down to the low at 86.25. It was a successful test as it rallied and settled above it at 88.50. This is above the key technical level at 88.175. Together this helped attract buyers and Hogs opened higher on Tuesday and eventually went limit up. It closed up at the limit at 91.50 and aggressive buyers could buy a stronger open on Wednesday looking for a continuation higher. Conservative traders can hope for a pullback and buy futures on a pullback into the middle of today’s range. If Hogs are ready to resume its uptrend the 97.825 high is in jeopardy. Resistance is at 92.375, 93.50 and then 95.30. The 61.8% retracement looms just above the high at 98.00. A break out above here after the failure on the last attempt could see price eventually break 100.00. Limits expand to 4.5 handles in Hogs for trade on Wednesday. Place stops below the Monday low.
The Lean Hog Index has been on a positive track since bottoming below 52.00 in March. It is now up at 75.80 as of March 29. The pork cutout index has also been on a tear, reaching 81.44 as of 4-1-2019. Expectations of large Chinese purchases of US pork remain on traders’ minds. The caveat in this bullish scenario would be if the US closes its border with Mexico and trade stops cold. This could pressure Hogs on the closing of the border. If end users and producers believe in this scenario, you may see an explosion in sales to Mexico in the short run if they have fair warning that the border will shut and have enough time to deliver the pork. It could be a wild week in the Hog market. Good Luck!
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Friday, April 5 at 2:30pm. 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.