February lean hog (HEG26) futures present a buying opportunity on more price strength.
See on the daily bar chart for February lean hog futures that price action Monday scored a big and technically bullish “outside day” up on the daily bar chart—whereby the low was lower and the high was higher than the previous session’s trading range, with a higher close. See, too, at the bottom of the chart that the moving average convergence divergence (MACD) indicator has just produced a bullish line crossover buy signal as the blue MACD line has crossed above the red trigger line.
Fundamentally, historically high beef prices at the meat counter are likely to drive better consumer substitution demand for cheaper pork cuts as the holidays approach and in the coming months. This is especially true as the latest NFIB small business optimism index declined to a six-month low, suggesting Main Street USA is concerned about the economy and that consumers are tightening their budgets. Also, hams are in higher demand during the holiday season.
A move in February lean hog futures above chart resistance at $83.00 would give the bulls more power and it would also become a buying opportunity. The upside price objective would be $92.50 or above. Technical support, for which to place a protective sell stop just below, is located at this week’s low of $78.625.
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.
On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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