Farm Progress

The move up leaves the way open to higher prices, and good demand may be pulling feeders up with fed cattle.

Chris Swift 1, Blogger

February 22, 2017

2 Min Read
This live cattle chart shows both an island reversal moving up, and the possibility of a head-and-shoulders top to move down.Swift Trading Company

A gap up and all technical indicators pointed due north is a good way to start off trading for the week.

The cattle market is being surprised at just about every turn. From numbers not being as elevated as thought, to carcass weight declines, to increased consumption, cattle are being pulled forward green to meet the current demand. This has surprised most and the gap higher is perceived an indication of that surprise.

So, this does begin to add some credibility toward the thought that the Elliott wave 2 is nearing its end. A trade above $116.65 April is the next hurdle. A trade above it will leave only the current high for the year as resistance. I see nothing to do at this juncture.

In the feeder cattle, technical indicators have turned due north as well. A gap up this morning was followed by a charge above the previous congestion created after the gap down. Hence, this potentially makes for a massive "island reversal."

The only resistance left on the August feeders is current high of $129.10. The higher trade increases risk of loss to where I have the stops. Although I continue to anticipate a higher trade, one may want to exercise some caution as risk assumed is elevated from the most recent price action. I'm not quite ready to move stops up yet, but potentially soon. It has been brought to my attention of the looks of a head-and-shoulders pattern forming on the August contract. Yes, I do see that. At this time, it could easily be one, therefore the stops are in place.

My analysis suggests, though, that there is a vacuum in place. That vacuum is the consumer pulling inventory through the pipeline of an already adjusted feed yard toward lighter carcass weights, and finally the feeder cattle are beginning to feel the pull. Therefore, I anticipate the head-and-shoulders pattern to not produce the right arm of the pattern. With positions recommended and a little cushion in most, I see nothing to do at this time.

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. Past performance is not necessarily indicative of future results.

About the Author(s)

Chris Swift 1


Chris Swift is a broker and advisor in Nashville, Tennessee, offering technical and mechanical analysis of the commodity market to help people improve their risk management.

To contact Swift about hedging or to subscribe to his daily market comments at:

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