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Blue Line Express: Livestock Roundup


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Blue Line Express

The Livestock Roundup

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Cattle Comments: Cattle futures opened the early morning trade on a gap higher after a strong cash trade late on Friday. The first hour of trade led to some get me out orders from weak or overleveraged shorts. Many were expecting cash to come in higher, but not many were expecting to see a 119-119.50. Seeing how cash develops this week will be very important as the non-commercial traders are long roughly 138,000 contracts, an increase of nearly 8,600 contracts from the previous week. Many market participants are hoping to see a more active cash trade through the week as this will likely offer a little more stability to futures.

PM Boxed Beef Choice Select
Current Cutout Values: 203.02 193.64
Change from prior day: -.28 1.16
Choice/Select spread: 9.38

Cattle Technicals

Live Cattle (December)

December live cattle futures screamed higher Monday morning to reach and close above new contract highs. The rally from last weeks lows of 115 has elevated the RSI (relative strength index) into the overbought session. This is the most overbought the market has been since the beginning of May when the market started peaking out (previous contract highs). With that said, that does NOT mean the market cannot go higher as cattle is a unique market. The bottoms and tops are a process and not a point for any given market so be sure to have some risk parameters in mind if youre thinking about establishing a new position. The gap on the chart comes in at 121.625, this will be a significant support level going forward. If the bears can achieve a close below we could see long liquidation from the net long funds.

Resistance: 123.825**, 125.124-125.50**, 127.65***

Support: 121.625***, 119.175-119.85**, 117.375-117.725**

Feeder Cattle (January)

January feeder cattle made new contract highs at 159.825 this morning after gapping higher on the open. As with live cattle, the open was likely littered with get me out orders from weak shorts or overleveraged shorts. The bulls could not retain all of the early morning momentum which led to some long liquidation in the back half of the day which led to a close below the opening print. The RSI (Relative strength index) is reading a 66, the second highest level since the beginning of May when we failed out against 150. First technical support comes in at 156.775, a break and close below this pocket could lead record long funds to take some profits off of the table. Contract highs made this morning at 159.825 will act as first resistance, above that is 160.725.

Resistance: 159.825**, 160.725- 160.90**, 165.225****

Support: 156.775**, 155.55**, 149.70-150.20***, 148.74**

Lean Hog Commentary and Technicals (December)

December lean hog futures found strength on Mondays trading session with futures closing up 1.24% or .80. Some of the strength was likely spill over momentum from the cattle complex. The cash market has been stable recently but there have been talks of that becoming more sluggish. With that said, the Technicals suggest we could now see a breakout above contract highs of 65.675, how much more room they have to the upside remains to be seen. Proprietary indicators point towards a run towards 67.825 if the bulls can achieve consecutive closes above resistance. Fridays commitment of traders report showed non-commercial traders were net long 62,423 contracts, this was up 2,549 from the previous week.

Resistance: 65.20-65.675***, 67.825**, 71.325**

Support: 61.50-61.90***, 60.14**, 55.775-56.20****

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.



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About the author


Oliver Sloup is Vice President of Blue Line Futures, a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line Futures mission is to put the customer first, and that means bringing YOU the best customer service, consistent and reliable research and state of the art technology.  Oliver has been a guest on CNBC and Bloomberg, among others.  Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.

 

 

Contributing author since 10/6/17 

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