Technically Speaking

Weekly Analysis: Livestock Markets

Source: DTN ProphetX

Live Cattle: The April contract closed $4.70 lower at $148.525 last week. The secondary (intermediate-term) trend looks to have turned sideways. As discussed last week, April live cattle ran into resistance near $154.05, the 38.2% retracement level of the Wave C sell-off from $166.00 through the low of $146.65. The fact the contract couldn't push to resistance at the 50% level of $156.325 indicates increased pressure from the commercial side of the market, an idea confirmed by the April weakening against the June contract last week. Noncommercial traders continue to add to their short-futures position, with Friday's CFTC Commitments report showing an increase of 3,444 contracts. Weekly stochastics finished last week back below the oversold level of 20%.

Feeder Cattle: The March contract closed $4.675 lower at $199.175 last week. The secondary (intermediate-term) trend remains sideways. Support is at the 4-week low of $193.00, a price that was a test of technical support near $193.90, the 67% retracement level of the previous uptrend from $172.00 through the high of $237.80. Resistance is now pegged at the new 4-week high of $206.40. Weekly stochastics are neutral, just below the oversold level of 20%.

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Lean hogs: The April contract closed $1.375 higher at $67.40 last week. The secondary (intermediate-term) trend turned up last week as the contract posted a bullish key reversal. After moving to a new contract low of $63.225, April hogs rallied above the previous week's high of $68.50 before closing higher for the week. This also created a bullish crossover by weekly stochastics below the oversold level of 20%, confirming the pattern seen in the futures market. Given the increasing bearish commercial view indicated by the strong downtrend in the April to June futures spread, solid resistance is expected between $74.70 and $76.40. These prices mark the 33% and 38.2% retracement levels of the previous downtrend from $97.65 through last week's low.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.64, down $0.01 for the week. The secondary (intermediate-term) trend remains down with the last signal a bearish crossover by weekly stochastics the week of December 29. After falling to a low of $3.44, a test of technical support at $3.47, the NCI.X has moved sideways. The last two weeks has seen a test of resistance between $3.62 and $3.68, prices that mark the 50% and 67% retracement levels of the initial selloff from $3.80 through the $3.44 low. Weekly stochastics remain neutral to bearish.

Soybean meal: The May contract closed $12.70 higher at $338.70 last week. The secondary (intermediate-term) trend turned up as the futures contract posted a new 4-week high of $342.50 and weekly stochastics turned bullish again. Initial resistance could be seen near $351.00, a price that marks the 50% retracement level of the previous downtrend from $409.60 through the low of $292.30. However, the strong uptrend (strengthening inverse) in the May to July futures spread reflects an increasingly bullish commercial view of supply and demand. This could lead to a test of resistance between $364.80 and $370.50, the 61.8% and 67% retracement levels, if not a full retracement back to the $409.60 high.

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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.

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