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Cattle Futures Reaching Oversold

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Livestock Roundup

Cattle Commentary: Cattle futures finished the day lower for the fifth consecutive. February live cattle futures closed the day 1.35 lower at 119.175, this after trading in a range of 1.70 for the session. January feeder cattle followed suit and finished the day 1.725 lower at 146.1, this after trading in a 2.075 range on the day. There were 653 cattle offered on the Fed Cattle Exchange with no sales and 117.25 and 117.50 passed on. Later in the afternoon we saw some more cash activity with from 117-118.50 in Texas, Nebraska, Colorado, and Wyoming. Dressed came in at 187. This compares with last weeks 120.50 and 190 trades. As we mentioned on RFD TV today, volatility often times invites more volatility into the market; meaning outside market participants are stepping in trading momentum and not fundamentals. This can lead to irrational price movement which leads to the old saying: The market can remain irrational longer than you can remain solvent.

PM Boxed Beef Choice Select
Current Cutout Values: 206.40 184.11
Change from prior day: -2.68 -2.52
Choice/Select spread: 22.29

Cattle Technicals

Live Cattle (February)

February live cattle continued their slide lower today which brought the RSI (relative strength index to its lowest level since we bottomed in August. The RSI is currently at 33, as mentioned yesterday, cattle very rarely breach 30 which is typically the barometer for oversold conditions. The market could continue lower, but the RSI suggests we could see some sort of consolidation in the near term for the market to catch its breath. First support today was breached at 119.36, this represented the 100-day moving average. If the market cannot regain ground above this level, we could see the market continue to drift lower. The next line in the sand comes in at 118.05, with the more significant pocket being 116-116.50.

Resistance: 120.70***, 122.65-122.70***, 123.75**, 126.65-126.975****

Pivot: 119.36

Support: 118.90*, 118.05***, 116-116.50****

Feeder Cattle (January)

January feeder cattle continued to see long liquidation today, printing their lowest price since September 13th. First technical support was breached today from 146 down to 145.62, the market managed to find some buying down here to support the market back above 146 into the close. This represents a key Fibonacci retracement as well as those key levels back in the middle of September. These levels will continue into tomorrows session. If the market can attract some buyers tomorrow, it is possible we see some consolidation back towards 148.88-149.10. This pocket represents previous support which was defined by the 100-day moving average and the 50% retracement (middle of the range) from the August lows to the November highs. The relative strength index is at 32, this is the lowest level this January contract has ever seen which indicates that we are near exhaustion in the short term.

Resistance: 148.88-149.10***, 151.10-151.75**, 155.55-155.95***

Support: 145.62-146****, 144.15-144.55****, 141.65**

Lean Hog Commentary and Technicals (February)

Lean hogs saw follow through pressure today with the February contract closing 1.55 lower at 68.95, this after trading in a rage of 1.825 on the session. Cash trade has been steady to mixed for the most part. It has been a lack of bullish headlines and spillover pressure from the cattle complex that have helped lead to some long liquidation. We saw Fridays commitment of traders report show funds with a net long of 63,561 contracts. If we continue to start to see heavier weights and a lack of supportive news, we could see continued pressure. The 50-day moving average was tested and held today at 68.90, a break and close below could lead to additional pressure in the market. 68.40 will be the significant level to watch on a closing basis as look towards tomorrows session. A break and close below sends us back towards 66.30-66.90.

Resistance: 70.28**, 72.25-72.45**, 73.30****

Support: 68.40-68.90***, 66.30-66.90****, 65.40**

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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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