June live cattle futures (LEM25) present a selling opportunity on more price weakness.
You can see on the daily bar chart for June live cattle futures that prices on Friday, March 21 stretched to a contract high but then promptly backed off to close lower and near the daily low. This created a technically bearish buying “exhaustion tail” on the daily chart, whereby prices scored a new for-the-move high but then the buyers finally became exhausted as prices quickly dropped to close well off the new high and near the daily low.
Also, you can see at the bottom of the chart that the Relative Strength Index has shown bearish divergence as the RSI line on March 21 turned down as prices hit the new contract high, also suggesting a market that is overdone on the upside and that the bulls have run out of gas.
While the overall cattle market supply and demand fundamentals still favor the bulls, it’s my bias that cattle futures traders have already factored those bullish fundamentals into present prices.
A move in June live cattle futures below psychological support at $200.00 would better suggest a near-term market top is in place and it would also then, and only then, become a selling opportunity. The downside price objective would be $190.00, or below. Technical resistance, for which to place a protective buy stop just above, is located at $205.00.
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):
Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
