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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 5, Orleans, Massachusetts
(October 2, 1997) LIVE CATTLE: SHORT TERM–Aggressive fund selling combined with local selling sent the cattle to new near-term lows due to concerns that cash may falter from current levels. There is talk that cash will drop to 66 rather than 67 or 68, which had been earlier anticipated. Talk remains also that boxed beef prices will be firming, which may encourage the packer to be a more aggressive buyer. The best cure for low prices is low prices.
LONG TERM–There are tight supplies of feeders. While this is obviously bullish to feeders, it also suggests potential tightness in live cattle in April contracts. Traders should begin to focus on feeders and live cattle as having good potential.
RESISTANCE–Resistance basis October may appear near 6700, 6750, 6850, 6885, 6940-6920, 6960, 6990-6995, 7020 and 7050.
SUPPORT–Support basis October lies near 6622, 6600, 6530.
RECOMMENDATION–Aggressive traders might consider buying the October or December cattle on this break with 50-100 point stops. Look for a test of the 6960 area basis October, with the potential for a continued rally. Traders should take profits in that area with the idea of re-entering on a pullback. Long-term bulls should hold December cattle for the long haul. Option traders might buy December calls.
M. Steven Morgan
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