I must admit that from the fundamental side the meat sector is probably my least stronger market… However, technicals are techincals and a chart is a chart and the meat sector ( primarily Live Cattle, Lean Hogs and Feeder Cattle ) have been on a very strong uptrend since May 2013.
The latest cattle on feed report still shows some bullish supply/demand situation while the commitment of traders report suggest there are still many speculators in this market ( so always a possibility of long liquidation).
Using daily Heikin-Ashi chart type ( variation of candle sticks ) along with my proprietary indicators above ( free trial is available ) I got a good read on a long July 23rd ( blue square ) and a short Aug 1st. ( red diamond ) While at this point I did not get a long signal nor a short signal it seems that the path of less resistance is up. Strong resistance band between 222.00 and 223.40 and what price action does around these levels will provide me clues as to future direction of this market.
If you are using outright futures, I would probably wait for a pull back towards 217.50 before trying to go long. If you are an experienced option trader and understand the unlimited risk nature of selling option premium, this may be a good time at looking at a ratio spread on the call side, where one buys a call option closer to the money and sells 2 call options out of the money to “finance” the trade, as out of the money calls premium is pretty inflated in my opinion.
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Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
About Ilan Levy-Mayer
Ilan Levy-Mayer has been a commodities broker for over 15 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Broker at Cannon Trading Company.
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