Good Wednesday Morning — June 17
August feeder cattle continue to stay spicy, with a possible target up near the 374 area.
But first, let's talk about what got us here.
Remember the New World screwworm event that hit the market on June 4? That news helped create a massive double bottom in August feeder cattle. Now that some of the fear has worn off—similar to what we've seen in the past with BSE and E. coli headlines—the market has responded with a strong move to the upside.
As we look at resistance levels, a Fibonacci retracement provides some interesting insight. If you connect the April high to the June low, you'll find that we're approaching some significant technical levels.
The big one traders are watching is the 78.6% retracement level. That comes in around the 370 area and represents a major resistance point from the April high to the June collapse. We also have additional resistance near 374.
In other words, there's an important resistance pocket between 370 and 374, and that's what this market appears to be targeting.
Because of that, a pullback today should not come as a surprise. In fact, the market could retreat back toward 362 before making another attempt to launch higher into that resistance zone.
Seasonally, feeder cattle remain in a favorable period. Historically, the market shows strong upward tendencies from the beginning of June through the beginning of July. The June 4 low may prove to be an important turning point as the market attempts to climb into the July 4 timeframe.
It's definitely something worth watching.
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