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Cattle Futures Technical Analysis - Cattle Futures Trading: 2019-11-25
Beef production increased in the US
US Department of Agriculture (USDA) announced an increase in beef production in October 2019. Will LCATTLE quotations fall?
US beef production increased by 11% in October compared to September 2019 and by 1% compared to October 2018. The USDA forecasts a 2.2% further growth in 2020 compared to the current year. Currently, it is difficult to say whether China will increase US beef purchases, as trade negotiations between the two countries are quite difficult. China demanded that the US authorities stop interfering in Hong Kong's political crisis. Meanwhile, China is actively purchasing beef worldwide. In particular, China increased its imports from Brazil in January-October 2019 by 23.6% compared to the same period in 2018. The monthly “Cattle on Feed” report by the USDA will be released late Friday night. According to forecasts, the number of cattle in feedlots in October 2019 will increase by 11.4% compared to October 2018.
On the daily timeframe, LCATTLE: D1 has left the uptrend. A number of technical analysis indicators formed sell signals. A decrease in quotations is possible in case of an increase in the number of cattle in the US and problems in US-China trade negotiations.
- The Parabolic indicator gives a bullish signal. It can be used as an additional support line, which should be breached down before opening a sell position.
- The Bollinger bands have widened, which indicates high volatility. The upper Bollinger band is titled down.
- The RSI indicator is above 50. It has formed a negative divergence.
- The MACD indicator gives a bearish signal.
The bearish momentum may develop in case LCATTLE falls below the three fractal lows and the Parabolic signal at 121. This level may serve as an entry point. The initial stop loss may be placed above the last fractal high and the 8-month high at 125. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (125), without reaching the order (121), we recommend closing the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
| Position | Sell |
| Sell stop | Below 121 |
| Stop loss | Above 125 |
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