Walsh Trading Daily Insights
Commentary
December Lean Hogs started the week on a weak note, making a new low, trading down to 65.30 then was able to garnish some strength making its way higher the rest of the session. It took out the Friday high and traded past resistance at 67.80 to the session high at 67.925. Settlement was nearby at 67.75. The new low was a second test of the rising 21 DMA at 66.22 and it held again. Price was also able to break out and settle above trendline resistance at 66.975. The lower low and the rally past the Friday high formed an outside candlestick and the positive settlement makes it a potentially bullish formation. A break out above the Monday high could see a retest of resistance at 68.75 and resistance then comes in at 69.80. Support is at the trendline (66925), 66.55, the rising 21 DMA and then 64.80.
The Pork Cutout Index dropped and is at 96.99 as of 10/23/2020.
The Lean Hog Index down ticked and is at 78.54 as of 10/22/2020.
Estimated Slaughter for Monday is 492,000 which is above last week’s 477,000 and last year’s slaughter at 491,000.
January Feeder Cattle continued its consolidation, but formed a potentially bullish outside candlestick formation. The Monday range had its low below Friday’s low and high above Friday’s high. It also settled in positive territory at 126.775. Settlement was above the key level at 125.90. Trading above the 127.125 high could see price revisit resistance at 127.575 and then 128.875. A failure from settlement could see price retest support at 125.90 and then the October 20 low at 124.25. Taking out the October 20 low could see a swoon down to support at 122.775.
The Feeder Cattle Index declined and is at 133.70 as of 10/23/2020.
December Live Cattle started the week on a down note, making a new low at 102.525 and settling below the 200 DMA (103.64) on the continuous chart at 103.40. There was a rally however, after settlement in the post settlement session taking price past the 200 DMA with the last trade at 103.975. Hopefully this is a precursor to a short-covering rally in cattle. The session high was right at the 104.20 resistance level. There is a lot of overhead resistance in cattle. A rally past the high has resistance at 104.85, the 100 DMA (105.30), and then 106.025. Support is at 103.00, 101.625 and then 100.275.
Boxed beef cutouts were mixed with choice cutouts up 0.34 to 207.83 and select down 2.91 to 188.49. The choice/ select spread widened to 19.34 and the load count was 135.
Monday’s estimated slaughter is 118,000, which is even with last week, and above last year’s 116,000.
The USDA report LM_Ct131 states: Thus far on Monday negotiated cash trading in Nebraska and the Western Cornbelt has been mostly inactive on very light demand. 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 traded at 106.00. Last week in Nebraska live purchases traded at 105.00 and dressed purchases from 162.00-166.00. In the Western Cornbelt last week, live purchases traded from 103.00-105.00 and dressed purchases from 163.00-165.00. The report shows live cash trade traded at 103.00.
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 29, 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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