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Livestock Levels


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Live Cattle

April Live Cattle resumed its uptrend after a one day pause on Tuesday, March 21, 2017, making a new high (120.075,) after an early breakdown in price failed to take out Mondays low at 118.45, reaching 118.50. The recovery took price to the high of the day and then Live Cattle consolidated and ended the session just below the high at 119.775. The rally is important as the fedcattleexchange.com auctions is on Wednesday morning at 10 AM CT (3,928 head) and follow through to the upside before the auction could lead to another strong auction. The auction lends some transparency to the pricing of cash cattle. Before this auction, packers havent had to compete for cattle this early in the week and this helps to provide some insight into their needs for the week. Strong box beef cutout values are contributing to this rally as Choice closed $1.17 higher at $224.93 and Select closed $1.44 higher at $215.41. The futures rally above the Friday, March 17 high (119.75) could lead to a test of resistance at the January 19th high (121.45). This could be a key battleground for the rally. A close above the January 20 high puts the May 2016 high (124.675) in focus. A failure from the January 19th high could signal a significant top and indicate a possible double top formation. More on this possibility as it evolves. A failure from the Tuesday high could lead to a test of support at the 8 DMA (118.25) and then the 13 DMA (117.30).

Feeder Cattle

Today was the April Feeder Cattles turn to rest. It failed to follow the rally in the Live Cattle and made a lower high. It also made a higher low. The session formed an inside candle formation and a doji candle. Todays range is inside the Monday range and todays open and close are essentially the same (within a couple of ticks). When the market contracts and develops into these formations, (especially after a strong session on Monday) a breakout from this candle could lead to the next move. A breakdown from the low (131.85) could lead to a test of support at the 200 DMA (130.525). The 8 DMA is at 129.80. A breakout above the high could lead to a test of resistance at the September 22 high (134.175) and then the March 2013 low (136.80).

Lean Hogs

April Lean Hogs continued to breakdown and tested support at 67.90, making its low at 67.725. Hogs have broken down since peaking at the March 14 high (71.275) which is near the 61.8% retracement (71.43) of the June 2016 high (90.425) to the October 2016 low (40.70). It has traded lower for the past 5 days and is poised to test support at the February 23 low (66.025). Support then comes in at 64.90. A reversal from support could lead to a test of resistance at the 8 DMA (69.375). A rally above the 8 DMA could see a test of resistance at 70.00 and then the March 14 high.

For those interested I hold a weekly livestock webinar on Friday, March 24 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.

Sign Up Now

Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

Direct: 312.957.4163

888.391.7894

Fax: 312.256.0109

bdicostanzo@walshtrading.com

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.



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About the author


Ben DiCostanzo
Senior Market Strategist
Walsh Trading

I began my career in the Securities industry working as a runner on the floor of the New York Stock Exchange while I attended Pace University. I then started working for Salomon Brothers in their Government Bond Trading arena. After graduating from Pace University with a degree in Accounting, I transferred to Chicago and became a member of the Chicago Mercantile Exchange utilizing my experience to execute trades and manage risk for institutional clients as a broker for Salomon Brothers on the trading floor. I then embarked to trade for my own account in the stock indices pits as a local before moving off the floor to aid and assist individual clients in their trading endeavors. I now work at Walsh Trading holding a series 3 broker’s license whose duties include being the firm’s Chief Market technician.

I understand that every client's needs are different, and I pride myself in tailoring my service to each client's unique circumstances and needs. Individual client experience, risk tolerance, and capital all play a role in how I approach the markets. I am involved in all markets using technical analysis to find opportunities. My approach is driven by the principles of capital preservation.

My trading philosophy is that if you can recognize and manage the risk, you have a better chance to be successful in trading. I advise clients to always use stops as money management in my opinion is the most important ingredient in trading commodities.

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