November Feeder Cattle Finds Support
After being subjected to selling pressure for the majority of the week, the November feeder cattle contract found support at the 23.6% retracement level between the contract’s low, and the contract’s high. The low for the day was only a few ticks off of the actual 253.825 level, coming in at 254.050.
There’s no question about it - feeder cattle futures have outperformed over the course of the last calendar year, but it’s well substantiated when considering the market’s fundamentals. However, the question we’re looking to answer is whether or not Thursday’s move higher is sustainable. So, let’s take a deeper dive.
Corn prices and feeder cattle prices typically do not move in the same direction. Over the course of the last 8 trading sessions, a new trendline in December corn has emerged - showing corn push toward the upper-boundary of the 20 cent trading range it’s been stuck in over the last 5-weeks.
Friday's "Triple-Witching" Event
Friday represents a “triple-witching” event in which we have a (1) USDA Grain Stocks report (2) end of a fiscal quarter (3) end of the month. Per the latest CFTC Commitments of Traders report, managed money funds have amassed more than 319k short-positions in corn futures. Thus, any fund rebalancing will likely materialize in a short-covering rally.
Now technically speaking, if the 23.6% retracement is tested, it’s statistically probable that the 38.2% retracement is tested as well. If a short-covering rally materializes in the corn contracts tomorrow, it could put significant pressure on the November Feeder cattle contract, and lead to long-liquidation within feeder cattle futures. The chart below shows managed funds’ positions in feeder cattle futures, which unsurprisingly hold a significant net-long position of 102,372 contracts. Broken down, that is 119,259 long positions compared to a meager 16,887 short positions.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
There’s no question about it - feeder cattle futures have outperformed over the course of the last calendar year, but it’s well substantiated when considering the market’s fundamentals. However, the question we’re looking to answer is whether or not Thursday’s move higher is sustainable. So, let’s take a deeper dive.
Corn prices and feeder cattle prices typically do not move in the same direction. Over the course of the last 8 trading sessions, a new trendline in December corn has emerged - showing corn push toward the upper-boundary of the 20 cent trading range it’s been stuck in over the last 5-weeks.
Friday's "Triple-Witching" Event
Friday represents a “triple-witching” event in which we have a (1) USDA Grain Stocks report (2) end of a fiscal quarter (3) end of the month. Per the latest CFTC Commitments of Traders report, managed money funds have amassed more than 319k short-positions in corn futures. Thus, any fund rebalancing will likely materialize in a short-covering rally.
Now technically speaking, if the 23.6% retracement is tested, it’s statistically probable that the 38.2% retracement is tested as well. If a short-covering rally materializes in the corn contracts tomorrow, it could put significant pressure on the November Feeder cattle contract, and lead to long-liquidation within feeder cattle futures. The chart below shows managed funds’ positions in feeder cattle futures, which unsurprisingly hold a significant net-long position of 102,372 contracts. Broken down, that is 119,259 long positions compared to a meager 16,887 short positions.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.