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Live Cattle Futures Analysis

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Live Cattle Futures

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.  

Free in-depth analysis of the Live Cattle futures market written by a professional Live Cattle trader.

January 01, 2015

Live Cattle Trader, Van Commodities, Inc.

The Live Cattle Futures complex experienced a powerful trending year in 2014. The front month contract at the Chicago Mercantile Exchange (CME) is presently the February contract (LEG15). LEG15 closed at 163.55 on December 31, 2014 after rallying twenty-four percent from its closing price of 132.10 on the last day of trade in 2013. One of the drivers for the bullish price action in 2014 was due to the multi-year drought in several major cattle producing states resulting in the smallest cattle herd in over sixty years.

It would appear that 2015 may be more of a large trading range environment with several forces at work. The strong US dollar may have a negative effect on exports and imports and consumers may substitute pork and chicken for more expensive beef, while the drop in energy prices may result in more consumer visits to restaurants and a greater willingness to pay more for higher priced beef.

The ten percent selloff in LEG15 from November 19, 2014 to December 18 resulted in a deeply oversold market based on several momentum studies on both short and intermediate term time frames. The contract also found support just above the 200 DMA and a trendline dating back to December 18, 2013. The close to eight percent rally off the 155.125 low on December 18 has worked off the oversold condition on several short term momentum indicators.

On a short term trading basis LEG15 may find initial resistance at 167.20-168.35 and stronger resistance at 170.00-171.00. The contract may find initial support at 163.25-164.50 with stronger support at 162.40.

 

May 20, 2013

Live Cattle Futures Broker, Van Commodities, Inc.

Although the Cattle on Feed report this past Friday was somewhat bearish, it appears the price action over the past several weeks, in the cattle futures complex, had discounted the data. The Live Cattle future for June (LEM13) continued to trade down from its intraday high of 124.025 on May 02, to the intraday low of 118.70 this past Friday. Even with high cutout values over the past several weeks and LEM13 trading at a significant discount to cash, the Cattle futures complex had not been able to catch a bid over the past week until the opening bell today, May 20. The price action throughout today’s trade for the front month June contract to the April 2014 future was positive.

 

LEM13 is oversold based on several momentum studies on both short and intermediate term time frames. Although LEM13 did not technically have a reversal day to the upside, several of the deferred contracts did. Initial support for LEM13 may come in at 120.125-120.50, with strong support at 119.00-119.80. LEM13 may contend with selling on the way up over the short term. Initial resistance may come in at 122.50-123.75, with stronger resistance 124.50-126.02.

 

May 5, 2013

Live Cattle Futures Broker, Van Commodities, Inc.

Although wholesale beef prices rose to all time highs on Friday, the Live Cattle future (LEM13) pulled back on apparent profit taking going into the weekend. With cattle numbers at their lowest levels in sixty years and LCM13 trading at a significant discount to cash prices, it would seem that the contract should find buying support not to far under Fridays intraday lows. The supply side of the cattle market looks supportive for prices going forward, but consumer demand side for the outdoor grilling season seems to have been delayed by the colder than normal spring weather in large swaths of the country.

Several LEM13 short term momentum indicators registered overbought readings on the back of a three week rally, taking the contract from an intraday low of 119.375 on April 15 to the intraday 124.025 high on Thursday. Several intermediate term indicators recently rolled up from an oversold condition and would be supportive of further price gains. LEM13 may find initial support at 121.15-121.70 and further buying support at 120.00-120.50. Over the near term initial resistance may come in at 122.60-122.90, with further resistance at 123.15-123.90. On an intermediate term view a move above resistance in the 124.00 may enable LEM13 to move towards 126.00.

March 12, 2013

Live Cattle Broker, Van Commodities, Inc.

Beef prices have rallied roughly three percent over the past week. The higher beef prices may put packers in a position to bid up cash cattle prices. The intermediate term supply situation continues to look constructive for LCJ13, but traders still seem concerned about underlying retail demand for beef.

The Live Cattle contract (LCJ13) appears to be putting in a tradable bottom. The contract had a reversal day on Monday and several divergences over the past four weeks between volume, price action, and several momentum studies, seem to indicate a drying up of sell side pressure. Initial support may come in at 127.40-128.10 with strong support at 127.00-127.25.  If the lows have been seen LCJ13 should be able to trade up to 130.00-131.30 before serious resistance appears. 

February 8, 2013

Live Cattle Future Broker, Van Commodities, Inc.

The Live Cattle future (LEJ13) closed on the lows of the week Friday, February 08. The contract has now given up the majority of the gap up, spike rally post the bullish Cattle on Feed report, January 25. The all cattle inventory data released on February 01 also appeared to be supportive for the cattle market, but traders seem to be more concerned about the demand side of the equation over the near term.

 

LEJ13 appears to have more downside over the near term. Several intermediate term momentum indicators are still signaling an oversold condition from the three week sell off prior to the Cattle on Feed spike rally. Short term indicators worked off the oversold condition on the Cattle on Feed inspired rally and have now rolled over, possibly supporting further selling over the near term. Initial resistance may come in at 131.60-132.20 with stronger resistance at 132.70-133.25. Initial support may come in at 128.50-129.50 and strong support at 126.50-127.50, over the near term.

Decemeber 17, 2012

Live Cattle Trader, Van Commodities, Inc.

The roughly 2.8 percent intraday move from low to high by the February Live Cattle future (LEG13)  over the past five days has been nothing less than explosive. The fundamentals for the market going into the New Year look supportive of the price action. Chasing LEG13 may not be the best way to trade the market with the contract trading at a significant premium to cash prices. Technically the breakout over the 132.75 level projects the potential for a move higher over the intermediate term, but a pullback in the near term would not be a surprise.

 

Momentum studies are moving towards an overbought condition on short and intermediate term studies, but still have room for higher prices. Initial support for the market may come in at 132.25-132.60 and then 131.00-131.50. Sellers may come in at 134.20-134.50, but LEG13 looks like it may challenge its contract high at 135.90.

Live Cattle Broker, November 15, 2012

The bull market for Live Cattle which started in December 2009 appears to be intact on a longer term basis, although price action has been choppy since the beginning of March 2012. Prices in the second quarter of 2013 may start to manifest the effects of a smaller cattle herd. The chart for the weekly nearest future seems to be correcting the three year Bull Run, which started at a price around 78.70. Although the long term supply situation seems to be positive for Live Cattle, demand has been sluggish and Hurricane Sandy undermined the demand function further. Downside pressure in financial markets, due to expectations for slowing global growth and uncertainty about the Fiscal Cliff in the US has also dented sentiment in the cattle market. In the near term further choppy action with the potential for weaker prices is possible.    

After the market closes tomorrow, November 16, 2012, traders will be watching for the Cattle on Feed Report. Expectations are for continued declines in placements of 12.7 percent year on year and marketing’s to be up 2.6 percent. This average estimate from analysts leads to a forecasted decline in Cattle on Feed of 5.5 percent as of November 1st. 

 

Several momentum studies, on a shorter term basis have worked off there oversold condition and are in neutral territory. Intermediate term studies have worked off their overbought condition and are also somewhat neutral. Initial resistance comes in at 126.75-127.50 and further resistance should appear at 128.50-129.50.  Initial support in the near term should come 124.75- 124.00 and further down at 121.00-122.00.

Live Cattle Futures Broker, May 21, 2012

The CME live cattle futures contract basis June (LCM12) scored an outside reversal to the downside today as the market had already priced in an abundance of favorable factors. The news going into Monday’s trade from last Friday was mostly constructive and included a positive USDA Cattle on Feed Report; cash cattle prices which were up $3-$4 in the plains states at the end of last week; strong boxed beef cutout values, matching levels last seen in the early part of March and packer margins in the black. LCM12’s three week rally from the lows of April 27 recouped close to 40 percent of the contracts previous nine week drop.

The roughly 14 percent drop of LCM12 over the preceding nine weeks, from the end of February to the end of April, resulted from a confluence of factors including high gasoline prices, packer margins in the red, the LFTB or pink slime controversy and the reported case of a dairy cow with BSE. The negative market features were priced into the market during the nine week swoon and have mostly been reversed or seen to be non issues.

LCM12 is overbought on a short term orientation based on several momentum studies. The market is due a bit of a pullback after the strong performance over the past three weeks. Our near term price objective is 122.50 and the contract should find initial support on a retracement at 116.90-118.00. A move much below our secondary support level of 114.70-115.80 would lead to a reappraisal of our bullish stance.

Live Cattle Futures Trader, May 2, 2012

CME live cattle futures, basis the June contract (LCM12) closed down .875 at 112.65 cwt Wednesday. LCM12 started the day on a firmer note, but by midmorning the contract started to sell off on the back of a stronger dollar and generally weak outside commodity markets; including a stiff sell off in corn, wheat, and soybeans. LCM12 appears to be building a base after trading down in the preceding 45 days before hitting an intraday low on April 27 at 111.175. LCM12 seems to have absorbed a number of negative fundamental factors including: high gasoline prices, packer margins in the red, slower exports, the LFTB (pink slime) controversy and the BSE (mad cow) announcement last week. These factors have started to dissipate. Gasoline prices have weakened, packer margins are in the black, the LTFB controversy seems to have been dispelled and to this point no major export markets have changed their prior perspective on U.S. beef imports since the BSE report.

LCM 12 is oversold based on several momentum studies. The contract has declined just about 14 percent since hitting an intraday contract high on February 22, 2012 at 128.925. LCM12 could be due at least a trading bounce going into the late spring and summer barbeque season.   LCM12 is trading at a discount to cash markets and should have solid support in the 111.00 – 112.00 area. Initial resistance may come in around 118.00 with more significant resistance from the 120.00 to 122.00 area.

March 5, 2012

Cattle Broker, Van Commodities, Inc.

Live Cattle futures pulled back across the board for the second day today, March 05, 2012. Live Cattle futures, based on the April contract (LCJ12), dropped 3.25 cents over the past two days. The worries over high gas prices, draining cosumer's pockets and the high price of beef relative to poultry and pork, leading to substitution for lower priced protein, along with a technically overbought market resulted in Live Cattle Futures trading down across the board. LCJ12 appears to have put in a double top, which will be set off with a trade below 127.95 targeting a downside price objective in the high 124.00 area. The 100 DMA may offer initial support at 127.15 with more significant support at the 200 DMA around 125.50. Back month Live Cattle Futures also have potential topping patterns with the potential for 2 - 3 cent moves to the downside.

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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