Cattle futures closed lower Tuesday, February 3 after three gaining sessions, and I feel this pullback is a buying opportunity. CME Group cattle futures surged their daily trading limit of 3 cents a pound Monday, February 2, 2009, after the U.S. Department of Agriculture reported the size of the U.S. cattle herd is at its lowest level since at least 1971.
My proprietary technical indicators say cattle are looking bullish, and I recommend buying April futures near 86 with a stop at 82. If the market closes below that level, then I would exit the trade and likely rethink my strategy, but I expect beef prices to firm up over the next month and project a move to 98 by the end of March.
This market has been impacted by the global economic crisis, as a drop in demand has led to lower prices. Through January, cattle futures have fallen for six straight months. However, I believe this market is a bit oversold. As long as the stock market doesn’t crash and we start seeing signs of an improving economy, thinned herds should bring the supply/demand picture back into a more bullish trend. April cattle futures closed lower at 86.15 cents a pound Tuesday, February 2, 2009.
Please feel free to contact me at 800-266-0551 or via email at brobben@lind-waldock.com for more details on this strategy, or with any other questions you might have about the markets.
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