For the Week of July 08, 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:
In the midst of the Summer barbecue season, let’s follow up on the Meats commodity sector.
August Live Cattle
The August 2013 Live Cattle 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 traded above all highs dating back to May 7. This breakout was through a downward sloping trend line as well. 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, that Trend Seeker changed to an Uptrend. The Trend Seeker is a US Chart Company tool to help identify market trend. The Trend Seeker is still Up, with a Weak ranking. The MACD indicator agrees with Trend Seeker as its bullish and above the baseline. The Stochastic indicator appears slightly bearish coinciding with the contract price pulling back the past five trading sessions. The pullback to the high of 121.650 (5/07/13) sets up a buying opportunity. The ADX, a Momentum indicator, is already strong reading 26.60. An aggressive approach is to buy the contract on a breakout of Friday’s high (122.200). A conservative approach is to buy on a breakout of the 123.125 (6/27/13) high. 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 contract 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 Trend Seeker is still Up, with a Weak ranking. The MACD indicator agrees with Trend Seeker, as its bullish, now above the baseline. The Stochastic indicator is in the “over bought” territory but still bullish. The ADX, a Momentum indicator, is strong reading 27.01. Unlike the Live Cattle market discussed above, the market has not pulled back for an ideal entry point. The high of 152.375 (4/25/13) may act as support for a moment, setting up a potential entry opportunity.
August Lean Hogs
The August 2013 Lean Hog contract traded as high as 99.850 (6/27/13), testing the twelve month contract high of 100.050 (10/11/12), but has since sold-off. The contract rebounded slightly the last two trading sessions, setting up a solid pivot point at 96.000 (7/02/13). The Trend Seeker (a US Chart Company tool to help identify market trend ) is Up and the ranking is Extreme. The MACD indicator still appears to be bearish well above the baseline. The Stochastic indicator is currently bullish though. A breakout below the low of 96.000 and Trend Seeker changing to a Downtrend will set up a short entry opportunity. 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 Friday’s high of 97.825.
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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