Technically Speaking

Feb Lean Hog Update

By Darin Newsom , DTN Senior Analyst
Source: DTN ProphetX

The downtrend in the lean hog market discussed in this blog November 13 ("Feb Hog Trends - No Really) has strengthened. As expected, the contract has moved through initial support near $89.40, a price that marks the 33% retracement level of the previous uptrend from $78.375 through the spike high of $94.90. The question is now, how much lower will the contract go?

The 50% retracement level of the previous uptrend is down near $86.65, with the 67% retracement market near $83.90. The commercial outlook of the hog market remains neutral to bullish, with Feb to April futures spread holding between the five-year average (for this time of year) and five-year high. Given that possible support, the downtrend could be limited to the 50% retracement level.

Weekly stochastics are also slowly moving lower. After establishing a bearish crossover above the 80% level the week of October 28, the faster moving blue line is down to 45% while the slower moving red line is at about 55%. Both could be approaching the oversold level of 20%, and possibly a bullish crossover, when the futures contract nears the above mentioned price support level of $86.65.

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