Check out live cattle overlaid with lean hog futures:
These two markets tend to peak and trough together, often trending in the same direction.
Interestingly, cattle and hogs diverged in 2022. Live cattle futures rallied to a new all-time high while lean hogs wallowed in fresh multi-year lows.
I outlined a trade setup for hogs at the beginning of the year, highlighting a potential bullish reversal and the November pivot low as our risk level.
Here’s how I want to enter a new position in the April contract:
Last September’s closing high of 85.75 marks the breakout level.
I like buying a break above that level with an initial target of 91.50 (contract high) and a secondary objective of 100 (key level on the continuation chart).
But I’m out if the breakout fails to close above our risk level on a daily basis.
Full disclosure: Like most commodities, lean hog futures hand out whipsaws without hesitation. You must manage risk.
But livestock futures typically carry a risk uncorrelated to interest rates and the US dollar – the main culprits of today’s volatility.
Are you buying hogs above 85.75?
If not, did you buy hogs against the November low last month?
Commercial hedgers' long exposure to corn reached a new record.
The 10-year Treasury note is attracting commercial buying as hedgers pull within 7% of a new three-year extreme.
And commercials hedgers piled on more than 120,000 contracts of soybeans over the trailing four weeks, posting their largest long position in three years.
