Technically Speaking

Weekly Analysis: Livestock Markets

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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The weekly chart of August Live Cattle above shows a bullish change in trend, now that noncommercial net long positions have come down from heavy levels earlier in 2018. The market has had a deep retracement of its earlier uptrend and appears ready to trade higher. (DTN graphic)

Live Cattle: August cattle gained $2.15 last week to $105.77 on Friday, its highest close in more than a month. The decline in August cattle prices started roughly one year ago when noncommercials held 134,951 net longs. By mid-May, August prices had come down 23% and retraced 78% of the rally from the 2016 low to the 2017 high, discouraging noncommercials into getting out of all but 11,304 of their net longs. With speculators mostly washed out of the market, last week's higher close was able to turn the weekly stochastic higher, possibly signaling a bullish change of trend.

Feeder Cattle: August feeder cattle gained 95 cents last week to $147.27, reaching the highest close in a month. Similar to live cattle, noncommercials held heavy net long positions in feeder cattle when their price peak of $163.50 was reached in early May 2017. Now, just more than a year later, noncommercials are net short in feeders and commercials were net long 4,703 contracts, as of June 5. It is also interesting that during that time feeder prices were only able to correct 17% lower from their peak -- a bullish sign of how well supported the market is. The weekly stochastic shows a bullish change in momentum, giving August feeder cattle bullish potential for higher prices.

Lean Hogs: August lean hogs edged 40 cents lower last week to $77.12, staying in the same sideways trading range of the past two months, but showing signs of support. A lot has changed since mid-January when prices hit $85.00 and noncommercials were net long 55,523 contracts. Now down 9% from the high in January, noncommercials are net short and the commercial side of the market is net long 33,366 contracts -- a sign of attractive value by those that know demand best. The weekly stochastic has turned higher, a sign of bullish potential for hog prices.

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

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

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