I am recommending that we short the February Live Cattle contract at $125.
Moore's Research says that cattle shorted on November 27 has declined in 14 out of 15 years by December 11. We are a bit early but I am not sure the price will allow us to wait.
Cattle slaughter tends to be near the top in December, but peak hog slaughter overwhelms the market with meat. Further, retail grocers feature poultry and pork for the holidays at the expense of beef demand. Thus, cattle prices tend to be pressured lower into early to mid December. However, heavy beef consumption during winter then drives demand for live cattle and forces prices higher.
Therefore, we will exit those short positions around November 11 but turn right around and buy the same contract back around December 13 based on Moore's Research which suggests cattle appreciate between Dec 13 and the end of the year 15 of the past 15 years.
Looking at the weekly cattle chart, you can see that the weekly RSI and Stochastics levels are already overbought.
Short Cattle at 125 with a stop at 126, only risking one point. Each point is worth $420, so we are only risking $420.
Margin on live cattle futures is $1980.
I expect we will see the price drop to the 118 level by Dec 11, so we have the potential to pick up 7 points.
7 points X $420 = $2940
That would make a Merry Christmas for most people!
Update - contract was rolled out to March on 11/27/2019 112719PA
After a year of looking at Palladium longingly and admirably from a distance, I have decided to get up my courage and go for it. I am planning to buy Palladium at $1660. There, I said it.
For whatever the reason, PA has been trending for a long time, and that is what I need the way I trade to make any money. To break this down, this is what I see. First, looking at the RSI and Stochastics over the last year and a half, 3 of the last 4 times both indicators were oversold at the same time, the market was followed by nice gains.
The seasonals tell us that we are entering into the most profitable time of the year for trading PA with average monthly gains of 4%, 3.39% and 4.95% respectively for Dec-Feb.
The daily chart also shows that the 3 and 5 day RSI are both oversold and the 10 day moving average has turned lower signaling this is a DCL at the very least.
My trading plan is this. PA contracts are 100 troy ounce in size. My offer would be to buy 1 PA at $1660 per oz, so I will be controlling $166,000 of Palladium. If PA trades back to the recent highs of $1800, then my contract appreciated $140 X 100 oz or $14,000. If I can get this contract bought at 1660 and place a stop below the recent low at 1640, then I will be risking 20 points X $10 or $2,000 for the chance to make $14000. That is not a bad risk to reward ratio in this business. The fact that it is tradeable is what has my attention. When we get tradeable opportunities, you need to take them.
Here is the kicker. It ain't cheap. The margin required is $12,925. That is roughly the same amount as 2 stock futures contracts.
There will also be gold, silver, platinum, and yes Stocks still to trade in the near future. We won't be too far away from trading oil and gasoline futures either, so if this seems a bit out there don't sweat it. Just follow along with me.
One more thing..... if you are not using it already, I highly recommend https://finviz.com/futures.ashx to follow along all the different commodities we trade.
Recommended entry or exit prices may not necessarily be reflected on the track record. Markets can change quickly resulting in stops being moved or profit levels changed based on new information. Brokerage customers are the recipients of these potential price adjustments made after initial recommendations.