February lean hog futures (HEG26) present a buying opportunity amid further price strength.
See on the February Lean Hog Futures daily bar chart that Monday’s price action marked a large and technically bullish “outside day” on the daily bar chart, where the low was lower and the high was higher than the previous session’s trading range, with a higher close. Also see at the bottom of the chart that the Moving Average Convergence Divergence (MACD) indicator just produced a bullish line crossover buy signal when the blue MACD line crossed above the red trigger line.
Fundamentally, historically high meat prices at the meat counter are likely to drive better consumer substitution demand for cheaper cuts of pork as the holidays approach and in the coming months. This is especially true as the NFIB’s latest Small Business Optimism Index fell to a six-month low, suggesting that Main Street USA is concerned about the economy and that consumers are tightening their budgets. Additionally, hams are in greater demand during the Christmas season.
A move in February lean hog futures above the chart resistance at $83.00 would give the bulls more power and also become a buying opportunity. The upside price target would be $92.50 or higher. Technical support, for which a protective sell stop can be placed just below, lies at this week’s low of $78.625.
IMPORTANT NOTE: I am not a futures broker and I do not manage any trading accounts other than my personal account. My goal is to point you to potential business opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you can initiate. Any trade I analyze is hypothetical in nature.
Here’s what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):
Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before investing money in futures or options contracts, you should consider your financial experience, goals, and financial resources, and know how much you can afford to lose beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations when entering into those contracts. You should understand your risk exposure and other aspects of trading by carefully reviewing the risk disclosure documents your broker is required to provide you.
As of the date of publication, Jim Wyckoff had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com