April 7, 2021

 BUY FEEDER CATTLE

What I have been anticipating appears to be starting…

And I STILL see this as an “All In” situation…

It takes a certain amount of discipline to do this…which sometimes I have and sometimes I don’t… but here is how I think trading should be approached:

One - The first thing you are looking for in a trade is to determine what you expect the direction of a market to be. Will it be going Up, or Down?

Two - Next is to have some sort of idea of how big a move you can expect…with the potential for a large move being the only thing that should interest you. So DOES it look like a major move is imminent?

Three - If you have a suitable answer to those two questions, and if it appears to be worth the risk, you get on…And if it starts working…Do everything you can to just sit…To LET IT HAPPEN.

Regarding Feeder Cattle, my answer to 1 & 2 is a STRONG YES…They are now making new one year highs, just coming out of a MAJOR sideways consolidation, and with everything I think I know about how markets act, while it doesn’t mean I will be right, my view is that the probability of a BIG move (20 to 40 cents) to the upside is EXTREMELY high.

I might be naïve, but with the economy opening up, and jobs coming back  at gangbuster speed, and growth, both here in the USA and around the industrialized world, expected to be in the 6+% range (or more), I CAN ONLY THINK THAT BEEF PRICES HAVE NOWHERE TO GO BUT UP…and considering the size of bull moves we’ve seen in other markets, I CAN ALSO ONLY THINK THAT THE PRICE RISE WILL BE BIG AND DYNAMIC…I’ll also throw in my observation that, more often than not, markets tend to make moves MUCH larger than you ever think they will…That whether they’re moving for you, or against you, they “always” seem to go a hell of a lot further than you ever thought possible.

The recent move in Lean Hogs is a great example of exactly that…and in fact, Hogs are my “model” for what I think will happen in Feeders.

In my opinion, there is NO QUESTION that Large Speculative Funds are an enormous factor in determining the direction, duration and size of commodity market moves…And when you combine their ‘firepower” with a relatively small market, like Hogs and Cattle, the outcome can easily be one can only be described as truly MONSTER moves…wherein, as seen above, a 10 cent trading range is followed by an almost straight up 35 cent move.

Sometimes the money entering a bull market just keeps coming and coming and coming…as computers have no fear…and are totally ignorant regarding hackneyed & worthless phrases like “overbought,” or “too far too fast,” or “hitting major resistance,” or “due for a correction,” and all the other fears and nonsense that you hear from “experts.” As I wrote above, most moves tend to go MUCH further than you’d ever think they would…And that has definitely been the case in Hogs…and I think WILL BE what we get in Feeders.

Compare the two charts above…and note that Feeders DO look like Hogs a few months ago…

My final thought would be that with Corn and Soybeans being the primary feed ingredients in Feeder Cattle, the fact that both of those markets have had giant bullish moves…which SHOULD have absolutely crushed the Feeders…and did NOT…speaks volumes about the inherent strength of the Cattle Complex…In other words, if the price of the single most import factor in fattening out a steer, that being feed costs, didn’t push Feeders down…WHAT WILL?

I might be stupid, but I continue to see this as a “career trade” opportunity. I honestly wish I didn’t have to be here to watch it every day…

Give me a call if you want to get on…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Feeder Cattle