Technically Speaking
Darin Newsom DTN Senior Analyst

Monday 01/27/14

Possible Top in April Live Cattle?

As we know, the live cattle market has been explosive since last spring. A tight supply and demand situation coupled with increased buying interest from noncommercial traders has pushed contract after contract to new highs. Recently, the more active April hit a peak of $143.125. However, activity late last week could be indicating a secondary (intermediate-term) top has been established.

Source: DTN ProphetX

Take a look at the weekly chart for April live cattle. Note that the contract closed last week well below its new high. This sets the stage for possible renewed selling this week, possibly on the noncommercial long-liquidation due to concerns that a spike high has been established. Furthering the argument that a high may not be in place is weekly stochastics. Last week's close saw the faster moving blue line cross below the slower moving red line, with both above the overbought level of 80%.

This looks to be a clear bearish crossover, a signal that the secondary trend may have changed. If indeed the trend is now down, or even sideways to down, initial support is pegged near $136.50. This price marks the 38.2% retracement level of the previous uptrend from $125.55 (week of May 19, 2013) through last week's high. Continued bullish market fundamentals should continue to provide support, limiting the potential sell-off to a possible maximum of 50% near $134.35.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 7:23AM CST 01/27/14 by Darin Newsom
Comments (2)
Darin I don't think cattle buyers are following the red and blue lines! It's all blue blue sky. Danny Schaefer
Posted by DAN SCHAEFER at 11:05AM CST 01/28/14
I think there may be one more move up at grilling time. Clint
Posted by ubkash at 1:27AM CST 01/31/14
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