BrokersEDGE 12-15-17 Livestock recap

Cattle Commentary: Last week we had mentioned that February live cattle were coming into a seasonal buy from December 13th to December 28th. Over the last 15 years this has been profitable 14 of those years with the average gain being 2.41. So far that seasonal looks to be holding true as cattle found support after being in free fall mode for the previous two weeks. February live cattle finished Fridays session up 2.05 at 121.70, trading in a range of 2.775 on the day. January feeder cattle finished Friday up 1.70 at 147.95 after trading in a range of 3.175 on the day. For the week, both live cattle and feeder cattle closed higher adding 2.90 and 2.60 respectively. Cash trade was nonexistent through the first ¾ of the week, but bids were creeping higher all-day Friday. There were cash trades at 120.50 after the close in Wyoming, western Nebraska, and Colorado. In Kansas and Texas, we saw trade at 120. This should offer some support to the market to start the week, but how long it stays will be the question.

Technically Speaking: We had been writing about the market making a run back towards 120.70 for the February contract, this was the 50% retracement from the August lows to the November highs. The close above and sturdy fundamentals could encourage additional momentum higher towards the next resistance pocket from 123.355-123.825. This pocket represents another key retracement level and the 50-day moving average. On the chart you can also see that this was the breakout level on October 24th and the breakdown level on December 1st. If you have bought the market or reduced hedges over the last week, this would be your exit target. We know that funds have been reducing their long position over the past several weeks and a failure to break out above resistance will lead to additional long liquidation. Ultimately, we expect the market to consolidate into a “tighter” range as we round out the year


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