Meats Review by Stan Ehrlich of Ehrlich Commodity Futures
Email Stan, or call (415) 892-1183
Last Updated:  April 21, 2000

Meats - Live & Feeder Cattle - Hogs:

General Comments: Live cattle and Feeder cattle contracts have developed great sideways trading ranges, which are perfect for trading breakouts.   June lean hogs may be starting an acceleration phase into a blow off top.

Live Cattle:

Since early January October live cattle has gone into a sideways trading range.  Within that trading range it appears the October contract may be forming a double shoulder, double head, head and shoulder bottom formation.  If this bottom formation works correctly a close to above the neck line, which is almost exactly the same line as the bear trend line, should produce at least a $1.5 move up to approximately 74.50, and frankly I would expect two to three dollars.  there is a possible problem.  The seasonal tendency is for beef to move down into the summertime.  Therefore I would also place a sell stop immediately below 71.70 to take advantage of a failure of this possible bullish formation and the beginning of the usual bearish seasonal tendency.  So, just make a clear, I'm placing a buy stop above the 73.00 and a sell stop just below 71.70 simultaneously.  The risk factor should be very modest, probably a quarter to a half a dollar, whichever way it breaks out.   When one stop is filled, the other stop should be canceled.  So, I really don't care which direction it breaks out, I'll simply be expecting an approximate two to three dollar swing in either direction.

Live Cattle futures chart:

Feeder Cattle:

August Feeder cattle is very similar, although its sideways trading range from the beginning of the year does not contain the head and shoulder bottom pattern.  The August Feeder cattle looks more like a flat bottom right triangle.   These flat bottom formations, usually have the flat side broken, therefore there is a bearish bias to this pattern.

Feeder Cattle futures chart:

Lean Hogs:

June lean hogs have managed a breakout of an upward slanting channel to the upside, which is often an extremely bullish indication.  Upward slanting channels are usually bearish formations.  Hog prices are very high historically, but at the moment there is no sign of a top.  This combination can lead to extremely strong short period of time.  Under these conditions you might expect to see a blow off top.

Lean Hogs futures chart:

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