Live Cattle Futures Will Continue to Rise Throughout the Summer.
This week's focus turns to August Live Cattle Futures. I am sure many readers have seen the price of beef steadily increasing, especially as of late. In recent years, the state of Texas has been experiencing severe drought conditions which have significantly depleted the state's water source and has limited the amount of cattle that it produces. These conditions have caused ranchers to limit the amount of cattle output, or in some cases close up shop completely. We've had less and less supply to consume which has caused Live Cattle prices to steadily rise.
Over the coming summer months, I expect this trend to continue. US cattle herds are currently at a 54 year low. Along with already tight supply fundamentals, there have been almanac predictions for exceptionally hot conditions across much of the country, Texas included, in late June and through the month of July. The extreme seasonal weather that much of the country saw this past winter is expected to continue throughout the summer. I think that the conditions in Texas will continue to keep supply tight and increase the price of Live Cattle into the month of August.
The case for a bullish Live Cattle market is also strong on the technical side. We have seen a steep uptrend in Live Cattle futures since late last year. In the past 2 weeks, the market has consolidated its bullish move to form a perfect pennant pattern which is a continuation signal. If the market breaks this pennant formation strongly to the upside, the next near-term target would be 146.00.
I will look to utilize a longer-term strategy that would take advantage of the next potential leg up in this market past 140.00, While allowing over 2 months for the strategy to work. I will be looking to purchase August Live Cattle call option strategies that would be profitable in the case of a move towards 140.00 – 144.00. These strategies would work throughout the months of June and July and expire on August 1st. Per strategy used, we would look to keep maximum exposure in the market to $500 and the maximum profit potential to $2,400 at expiration.
I advise clients on trading futures and futures options markets on a day to day basis. If you have any questions regarding this chart or questions regarding trading futures and futures options, feel free to call me directly at 888-272-6926.
Thank you for your interest,
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