Walsh Trading Daily Insights
Commentary
December Lean Hogs was slammed right from the start of the trading session. The breakdown took price into gap region, with the gap high at 65.225 and the low at 64.80. The low of the session took place at 64.90, with buyers coming in and lifting price and grinding higher the remainder of the day. So, the gap successfully held the selling, leaving a small gap in place. Settlement was near the high (66.60) at 66.15. It formed a hammer candlestick. It looked like traders were determined to test this gap as yesterday’s sell off below support (6655) led to the early morning rout. We are still below that level with settlement so, in my opinion this will key trade on Wednesday. A rally above 66.55 could see price challenge trendline resistance at 67.525. Resistance is at the TL, 67.80, 68.90 and then 69.80. Support is at 66.55, 64.80,63.325 and then 61.80. (See trade idea).
The Pork Cutout Index dipped lower and is at 94.38 as of 10/12/2020.
The Lean Hog Index increased and is at 78.14 as of 10/09/2020.
Estimated Slaughter for Tuesday is 488,000 which is above last week’s 487,000 and below last year’s slaughter at 489,000. The weekly estimated total (so far) is 966,000 which is below last week’s 976,000 and last year’s 976,000.
November Feeder Cattle is hanging around the 200 DMA, with the Monday trade the third attempt to breakdown below it. The 200 DMA is at 135.20 and the three lows are at 134.60, 134.625 and today’s low just a little higher at 134.75. Each session was able to settle above the 200 DMA and today’s settlement was 136.825. It is also in the fifth wave of a bullish Wolf Wave pattern and it settled above the Friday high (136.675). This is bullish in my opinion. Call me for my opinion on what could happen next. Support is at 135.60, the 200 DMA, 134.25 and then 133.50. Resistance is at 138.95, the 100 DMA (139.16), 140.775, the 50 DMA (142.02), 142.40, and then 143.50.
The Feeder Cattle Index decreased and is at 140.71 as of 10/12/2020.
December Live Cattle continued its breakdown from Monday’s selloff early in the trading session. It made a new low in the December contract (since it took over as the lead contract), trading down to 109.65 which is just above the 109.60 support level. Cattle was able to make a reversal from here and rallied back and approached the session high established near the open. It settled near the high at 111.225. In my opinion, the breakdown into a new low just extended the trading range cattle is in. The recovery took price into the middle of its month-long trading range, with the high at 113.575 and the low now at 109.65. It formed a hammer candlestick formation and trading above the Tuesday 111.575 high could see price test the high of the trading range. Resistance is at 112.35, 113.90 and then 114.65. Taking out support at 110.80 could see price retest the new low. Support is at 110.80, 109.60, the rising 50 DMA is just below at 109.23 and then 108.65.
Boxed beef cutouts were lower with choice cutouts down 2.18 to 212.44 and select down 0.26 to 200.08. The choice/ select spread narrowed to 12.36 and the load count was 157.
Tuesday’s estimated slaughter is 120,000, which is even with last, week and above last year’s 119,000. The estimated weekly total (so far) is 237,000. This is above last week’s 236,000 and last year’s 234,000.
The USDA report LM_Ct131 states: Thus far for Tuesday negotiated cash trading in Nebraska and the Western Cornbelt has been limited on very light demand with a few live purchases from 107.00- 108.00 in Nebraska. In the Southern Plains, negotiated cash trading has been at a standstill. Not enough purchases in any region for a full market trend. Last week in the Southern Plains, live purchases moved at 109.00. Last week in Nebraska live purchases moved mostly at 108.00 and dressed purchases moved at 170.00. For the previous week in the Western Cornbelt live purchases traded from 107.00-108.00, and dressed purchases moved from 169.00-170.00.
Trade Suggestion(s)
Hogs – Buy the June 100 call and sell the June 110/100 put spread for negative 860.
Risk/Reward
Max risk is $560.00 per contract plus commissions and fees.
Futures N/A
Options N/A
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, October 15, 2020 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
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