For the Week of July 01, 2013
The Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.
Highlighting This Week’s Potential Breakouts:
As we are in the midst of the Summer barbeque season, let’s focus on the Meats commodity sector.
August Live Cattle
The August 2013 Live Cattle contract appears poised for higher prices. The contract was trading sideways starting on May 7, between 117.825 (5/20/13) and 121.650 (5/07/13). On June 21, the contract broke out above all highs dating back to May 7. This breakout also trading through a downward sloping trend line. There are touches on the trend line at 132.325 (1/04/13), 124.125 (5/02/13), and 120.550 (6/20/13). It wasn’t until June 26 however, when the contract closed at 122.175, did the Trend Seeker change to an Uptrend. The Trend Seeker is a US Chart Company tool to help identify market trend. The MACD indicator agrees with Trend Seeker, as its bullish and just below the baseline. The Stochastic indicator though is in the “over bought” territory and changed bearish on Friday’s trading action (the contract finished down 90 points). The current contract price is already above a 20-day Exponential and 50-day Simple Moving Averages. Look for a pullback before buying the contract on a breakout above the 123.125 (6/27/13) high. The ADX, a Momentum indicator, is already strong reading 25.10. The contract may find resistance around the 124.000 level. There are plenty of objectives on the chart if the market clears that level.
August Feeder Cattle
The August 2013 Feeder Cattle contract was trading sideways starting on May 8, between 147.775 (5/13/13) and 142.300 (5/23/13), before breaking out to the upside. The market broke out above two trend lines. The first trend line consists of touches at 154.475 (4/03/13) and 152.375 (4/26/13). The second trend line consists of touches at 164.050 (1/08/13) and 162.250 (1/28/13). Both converging trend lines were cleared after the close on June 27. The following trading session, the Trend Seeker (a US Chart Company tool to help identify market trend) changed to an Uptrend. The MACD indicator agrees with Trend Seeker, as its bullish and just below the baseline. The Stochastic indicator is in the “over bought” territory leaning bearish. The ADX, a Momentum indicator, looks to be hooking bullish. Just like the Live Cattle market noted above, a pullback would be ideal before entering the market. A couple of objectives may be the 152.375 (4/25/13) and 154.475 (4/03/13) highs. Potential stop losses may be placed below recent lows (146.950).
August Lean Hogs
The August 2013 Lean Hog contract sold-off strongly on Friday (the contract was down 2.00 points). This followed the previous session where the contract traded as high as 99.850 (6/27/13), testing the twelve month contract high of 100.050 (10/11/12). Even though the Trend Seeker (a US Chart Company tool to help identify market trend ) is Up, the ranking is Weak. Along with the MACD indicator appearing to rollover bearish well above the baseline, and the Stochastic indicator with a sharp move bearish, there may be an opportunity to the downside. A break of recent lows of 96.875 (6/21/13) or 96.225 (6/14/13) could setup as sell entry triggers. Potential objectives to the downside may be the high of 92.800 (5/02/13) or the low of 88.700 (5/17/13). A potential stop loss may go above the 100.000 price level if that fits the reward to risk ratio.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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