Technically Speaking

Lean Hogs Near Resistance

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Resistance is likely to show up near $70, the 2020 high, and a dollar above the 50% retracement of the 2019-20 decline (DTN ProphetX chart).

Lean Hogs:

December lean hogs fell back $1.92 last week, ending at $62.50 as prices pull back from the recent high of $67.10 on Sept. 14. Negotiated prices, in particular have had a big rally, from near $28 at the end of June to $63.86 on Friday. That is a gain of nearly $36 in roughly three months and a sign of a healthier balance in the cash market after being hit with coronavirus-related problems earlier in 2020. The December futures contract is currently priced $14 below the lean hog index, which sounds bullish, but a compromise of the two prices is more likely. December hogs likely have resistance near $70, the 2020 high and a dollar above a 50% retracement of the 2019-20 decline.

Live Cattle:

December live cattle ended down just 30 cents last week at $111.10, trading sideways the past several weeks and staying below the August high of $114.02. The bullish news for cattle is that negotiated prices have stayed firm with formula prices and negotiated volume active the past two weeks -- a sign of active packer bidding. On the other hand, cattle weights are 21 pounds higher than a year ago, restaurants are struggling, and it doesn't seem likely December cattle will be able to sustain trading above the August high of $114.02, while cash trade has done well to reach $107. A close in December cattle below the 100-day average at $108, if it happened, would signal a bearish change in momentum and likely encourage noncommercial selling.

Feeder Cattle:

November feeder cattle ended down 27 cents at $139.87, threatening to fall below support at $140, the site of the 100-day average. November feeders had a nice $36 rally, from $114 in April to $150 in August as the market recovered from the worst of its coronavirus-related problems. Cattle are flowing to slaughter once again and the feeder index is back near $143, a few dollars above the November futures price. Technically however, feeder prices have lost upward momentum as corn prices have firmed and November feeders are on the brink of breaking below support at $140. This market, and the economy in general, are still struggling with coronavirus-related limitations. If prices do break support at $140, the next hope for support should show up around $130.

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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.


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