We are going to be looking at the February live cattle contract in the January soybean contract. So let’s get this clock rolling!
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Good afternoon, traders. This is Matthew Bresnahan with Blue Line Futures coming to you from the Chicago Board of Trade. With today’s edition of the two minute drill, we are going to be looking at the February live cattle contract in the January soybean contract. So let’s get this clock rolling. So the February live cattle contract and pretty much all of the cattle contracts have seen a very precipitous sell off since the October 20th Cattle on feed report.
You know, there are some encouraging factors that may signify that we are approaching a bottom at least in the short term here. See this downward white trend line here, Mapping out the lower highs on each leg of this recent move corresponds with a bullish divergence on the relative strength index down here, which, you know, the new lows on the contract here on the February contract are not corresponding with new lows on the RSI index.
Now what that means is that each new low is coming in at increasingly less momentum. So let’s look at some of the other factors that, you know, may offer some support as to why we may be approaching a bottom. So the wash out in open interest is been pretty tremendous. You know, it’s trended lower in terms of manage money funds on the live cattle contracts, basically, since, you know, early September.
Now, seasonally, you know, things start to looking up at this time of the year for the cattle contracts. But, you know, we would like to see a little more, you know, indication before, you know, outright becoming bullish on the contract from where we are at now. Next, let’s look at January soybeans. So today’s USDA report was not all that friendly to soybeans here.
And we did see, you know, prices in the early morning session ahead of the report. Try and break back into this range here. But, you know, we did end up falling short. It does look like we may have a bit of a head and shoulders pattern kind of arriving here. And, you know, if we do see some rain coming in from Brazil over the weekend or, you know, any weather related events that may improve the outlook on South American soybean production, you know, I do think it would add some weight to this contract and we may move lower.
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