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Cattle Set For Another Breakout?

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Livestock Roundup

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Cattle Commentary: Cattle futures spend the first half of their day under pressure but found buyers step in the market towards the noon hour to elevate prices back towards the unchanged line. February live cattle finished the session down .275 at 125.775, this after trading in a 1.50 range. Feeder cattle saw similar price action with the January contract closing up .10 at 154.55, this after trading in a range of 1.60 on the day. News so far this week has been limited, that could start to shift tomorrow. Tomorrows Fed Cattle Exchange has 967 head listed. Last week there were 955 listed with 119 passed on and none sold. Majority of last weeks cash trade was 118-120.

PM Boxed Beef Choice Select
Current Cutout Values: 208.68187.20
Change from prior day: -.94 -.08
Choice/Select spread: 21.43

Cattle Technicals

Live Cattle (February)

Live cattle futures spent majority of the morning under pressure, testing yesterdays lows but failing to break down below. That failure to break down opened the doors for buyers to step in and press prices back towards the unchanged level. 126.65-126.975 will be a big pocket of resistance, a breakout and close above could encourage funds to step back in on the buy side. A failure to break out will lead to continued consolidation which could encourage long liquidation from the funds who still hold a sizable net long position. First support comes in at 124.35, but the more significant pocket comes in from 123.25-123.35. This represents a key Fibonacci retracement level from the August lows to the November highs, as well as the 50-day moving average, an indicator we have not closed above since September 7th when we started the rally from 114.

Resistance: 126.65-126.975***, 127.65-128**, 131.95****

Support: 124.35**, 123.25-123.35****, 120.70***

Feeder Cattle (January)

January feeder cattle looked like they were going to roll over but failed to get more selling momentum below our first support pocket from 153.45-153.85. The inability to break lower and the lack of new news invited some buyers into the market in the afternoon session. The market is now right back where we were yesterday and just a stones throw away from key technical resistance from 155.10-155.55. This represents the middle of the range from the October 23rd lows to the November 3rd highs. This also represents previous contract highs and the breakout point in October. A failure to breakout will form a head and shoulders which is a bearish technical pattern. However, we mentioned yesterday looking for a failure on the first test and that is what we got, the bad news is we are right back at this level and a breakout and close above will extend the rally and keep the bull trend intact.

Resistance: 155.10-155.55***, 156.40-156.75**, 158.70-159.27***

Support: 153.325-153.85**, 151.75-152.075***, 148.175****

Lean Hog Commentary and Technicals (February)

February lean hogs accelerated higher today after taking out key technical resistance from 70.30-70.675, this propelled the market closer to our next resistance at 72.45. Previous resistance will now become support from 70.30-70.675. We are very impressed with the rally from the lows just two weeks ago; that is code for we did not see this move coming. We could continue to rally from these current levels but do not see a fundamental catalyst that offers much more room above the contract highs that were made on November 1st.

Resistance: 72.45**, 73.30****, 74.50-75**

Support: 70.30-70.675***, 69.15**, 68.30-68.475***

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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.



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