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LE1! trade ideas

LE1!6.8.23 There is a reason why I suddenly picked cattle as a market that we could trade. It's a market that has tremendous profit potential and it was about to make new highs... and yet there will be tons of dead bodies.... the bodies of traders who tried to short the market.... and other bodies of Traders who went long in the market.... and they both lose money. If you do this a couple times and get burned... you will teach yourself that this Market is too risky...and too dangerous to trade. At least that was something I would have done years ago. Intuitively it makes sense because the price action is so obvious, and reversals can be so significant.... you can make significant money or lose significant money and so you think of the market is risky because you're having a hard time finding the proper trade. Markets like this offer you much more reward then Markets that are contracted and have no range. It's easy to draw the conclusion that volatile markets are too risky and contracted markets are safe and therefore less risky... which is not correct. It's time to start looking for trades in the cattle market.
CME:LE1!
by ScottBogatin
1
GOLD LE1!6.6.23 This video Focuses on gold and the possibility that the market is going to move higher or lower... it is Unclear... and that means it's not clear To define your edge. At the end of the video I decided to show you the cattle market because I believe this is a market that will give you lots of good trades for buyers and sellers because of its volatility.... despite the fact you're looking at this when the market has made A new high.... I think it's an all-time high as I remember. Please give a thumbs up if you like the video.
CME:LE1!
by ScottBogatin
1
What’s for Dinner: Beef or Pork?CME: Live Cattle ( CME:LE1! ), Lean Hog ( CME:HE1! ) When I started my career in commodity futures two decades ago, I took lectures from a former trader at the CME livestock pit. Mike used his favorite trade to explain the complex concept of inter-commodity spread. Here it is: Beef and pork typically had a retail price difference of $1 per pound. For example, a local butcher shop prices pork loin roast at $1.99/lb. and ground beef at $2.99. This price relationship was stable but subject to seasonal variations. Whenever the price spread gets too large, it has the tendency to converge to the long-term mean. Mike believed that cash market price pattern drove futures price relationship. When he observed the spread growing to $1.80, he would short the cattle-hog spread: Sell CME Live Cattle Futures and Buy CME Lean Hog Futures. With this trade, Mike expected hog/pork prices to go up relative to cattle/beef prices, reducing the spreads in both the spot and futures markets. This trade was remarkable in that it mainly relied on common sense and easily observable data. As long as you know beef comes from cattle and pork from hog and could go to grocery stores to check out the prices, you could handle this trade. Could we still deploy Mike’s strategy today? The answer is yes. Comparing to the pre-Internet age, we now have a lot more data available to validate this trade idea. Therefore, besides planning a trip to Costco or Super Wal-Mart, I suggest you read on. Cash Cattle Markets Live cattle trades in Texas, Oklahoma, New Mexico, and Kansas averaged $170/cwt (100 pounds) for the week ending May 12th, according to USDA data. This represents a 21% gain over the year-ago price of $140. Cattle auctions in Nebraska, Iowa and Minnesota averaged $175-176/cwt last week, up 22% y/y. USDA weekly Southern Plains cash cattle price trend shows the five-year average at around $120. Cattle price has been rising rapidly in the past three years. Cash Hog Markets Market hogs averaged $77.31 last week, down $30 (-28%) y/y, according to the USDA. Current price is approximately $5 below the five-year average. The latest CPI data shows that consumer price grew at an annual rate of 4.9% as of April. While food inflation is much higher at 7.7%, the category “Meats, poultry, fish, and eggs” only logged in an increase of 2.8%. However, not all meats are created equal. Beef price continues to go up, while pork, chicken and eggs pulled back from last year’s high prices. WASDE Report USDA closely monitors agricultural market conditions and publishes the monthly World Agricultural Supply and Demand Estimates (WASDE). The latest WASDE, published on May 12th, estimated the total U.S. red meat and poultry production for 2024 at 1% below 2023 level, as lower beef and lower pork production offsets higher poultry production. Beef production is forecast lower with expected declines in both fed and non-fed cattle supplies. Pork production is forecast slightly lower. For 2024, cattle prices are forecast above 2023 on tighter supplies. Hog prices are forecast higher on improved demand and slightly lower supplies. CFTC COT Report The CFTC publishes the Commitments of Traders (COT) reports and provides a breakdown of open interest for futures and options markets. It categorizes the reportable open interest positions into four classifications: • Producer/Merchant/Processor/User • Swap Dealers • Managed Money • Other Reportable What’s the key takeaway from the May 9th COT report on cattle and hog? Live Cattle futures (LE) o LE open Interest: 317,715, down 8.5% from previous week; o Managed Money decreased long positions by 11.7%; their long/short ratio is 7.1. Speculative traders are still bullish on cattle prices, but they have started to take profit. Lean Hog futures (HE) o HE open Interest: 230,026, basically unchanged (-0.1%) from prior week; o Managed Money increased short position by 14.9%; their long/short ratio is 0.68. Speculative traders are bearish on hog prices. Cattle and Hog Spread Trade – Explanation and Illustration The 20-year chart shows that the price spread between live cattle (LE) and lean hog (HE) broadly stays in the range of $20-$60 per 100 pounds. Whenever the price breaks out of the range, it will get pulled back in. From January to May 2001, the spread fell nearly $50 from $45 to -$2. However, it rebounded strongly to $38 in just two months. Last May, from the bottom of $22, the spread rose all the way to $92 in March. It recently pulled back to $80, which is still well above the upper range of $20-$60. If you study the market fundamentals in hog and cattle, you will find significant uncertainty about future price trend. However, based on historical data, it’s not unreasonable to expect the spread to narrow and converge to the mean, regardless of whether the individual prices are trending up or down. The spread relationship holds true because of the substitution effect. High beef price would nudge consumers to lower priced pork. The change in demand in favor of pork would pump up its price relative to beef price, reducing the spread at the end. If a trader holds this view, he could short the cattle-hog spread like what Mike did 20 years ago: Sell CME Live Cattle Futures and Buy CME Lean Hog Futures. October cattle contract (LEV3) is quoted $166.2 per 100 lbs., while October hog contract (HEV3) priced at $77.425. on May 12th. Thus, the price spread is $88.775. Both contracts are based on 40,000 pounds of meat and require $1,600 in margins. For the spread to narrow $1, our trade would gain $400. If the cattle-hog spread falls back to the upper range at $60, the futures account would profit $11,510. Using the initial margins of $3,200 as a cost basis, the spread trade return would be 360%. The above example is for illustration only. Our trade would stand to lose money if the price spread did not converge. For example, if the spread widens to $92, futures account balance would be reduced by $1,290, a negative return of -40%. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME:LE1!Short
by JimHuangChicago
A Beefy Premium.Live cattle recently hit an all-time high, leaving us wondering if the rally has gone too far. The front month contract reached 177 on April 13, surpassing the previous record set in November 2014. Meanwhile, lean hogs have been trading lower since last year. One way to assess this trend is to look at the spread between the two livestock markets. Both the absolute price difference and the Live Cattle/Lean Hog ratio are currently at highs. The absolute price difference is at its second-highest level ever, with only March 2015 having a higher reading. The ratio spread, meanwhile, is trading at the higher end of the range since 2015. So, what's driving this trend? Well, we could start by looking at what caused the surge in 2015. A mix of live cattle rising and lean hog prices falling contributed to the surge in the spread as cattle inventories bottomed in 2014. Looking at the current supply dynamics, we see the smallest cattle herd in eight years, with the previous low marked by the 2014 episode and hog supplies on a downtrend but still above the previous decade’s average. As consumers become more environmentally conscious, they may prefer pork over beef due to the former’s lower environmental impact per calorie. Additionally, with the price gap between beef and pork increasing, price-sensitive consumers may switch to other protein sources as inflation continues to weigh on their mind. In the longer term, consumer preferences could flip to favour hogs over cattle. Seasonality effects are also pointing towards an unusual year. Historically, May marks the low point for the spread as hog prices run up towards the middle of the year. However, with May already underway, the spread is not close to any lows and lean hogs are still trading down. This suggests that the current year’s spread is trading abnormally high compared to past trends. Given that both Lean Hog & Live Cattle Futures have the same contract unit of 40,000 pounds and price quotation of US cents per pound, we can trade the spread of the two contracts using a 1:1 ratio. To express our bearish bias on the spread we can sell one contract of the Live Cattle Futures and buy one contract of the Lean Hog Futures. Keeping in mind the 2015 run took close to 1.5 years to bottom, we will place our stops further out at 110 and take profit at 45, giving the spread a longer horizon and more room to play out. Each 0.00025 increment equal to 10$. So, will you be switching from steaks to pork chops anytime soon? The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: usda.library.cornell.edu usda.library.cornell.edu www.cmegroup.com www.cmegroup.com ourworldindata.org
CME:LE1!Short
by inspirante
Long position - Live Cattle futuresOne of our algorithmic, trend-following systems entered long at Live Cattle futures at 149. The system is holding the position with a guaranteed and progressive trailing stop loss of 0.3% and could average new positions if the trend is confirmed in the next weeks. In recent weeks we have converted a few algorithmic trading programs from Pro Real Code to Python, AFL, or Pine Script with the help of Chat GPT, which shows how revolutionary AI will become in the algorithmic investing space.
CME:LE1!Long
by blockmas
Inflation gone? I don't think so. Cattle futuresThis chart shows you everything you need to know about inflation. I was shopping yesterday and my steak cost $1/lb more than last month. If Powell doesn't go .5% today, this blow up to new ATH, and inflation will force his hand in July. Inflation isn't going away any time soon, look at gold, oil, etc. Traders are pumping commodities every time they pump the stock market. Keep in mind .25% today and ,25% in March is already priced in and this is headed to new highs. Note: weekly chart
CME:LE1!
by hungry_hippo
12
LE1! Futures ( LE11 ), H4 Potential for Bullish ContinuationTitle: Live Cattle Futures ( LE11 ), H4 Potential for Bullish Continuation Type: Bullish Rise Resistance: 159.175 Pivot: 157.875 Support: 155.375 Preferred case: Looking at the H4 chart, my overall bias for LE1! is bullish due to the current price being above the Ichimoku cloud , indicating a bullish market. Expecting price to continue heading towards the resistance at 159.175, where the previous swing high is. Alternative scenario: Price could head back down to retest the pivot at 157.875, where the 38.2% Fibonacci line is. Fundamentals: There are no major news.
CME:LE1!
by Tickmill
LE1! Futures ( LE11 ), H4 Potential for Bullish ContinuationTitle: Live Cattle Futures ( LE11 ), H4 Potential for Bullish Continuation Type: Bullish Rise Resistance: 159.175 Pivot: 157.875 Support: 155.375 Preferred case: Looking at the H4 chart, my overall bias for LE1! is bullish due to the current price being above the Ichimoku cloud , indicating a bullish market. Expecting price to continue heading towards the resistance at 159.175, where the previous swing high is. Alternative scenario: Price could head back down to retest the pivot at 157.875, where the 38.2% Fibonacci line is. Fundamentals: There are no major news.
CME:LE1!Long
by Genesiv
CattleCattle – Weekly Continuous: The gray vertical bars represent the expiration month of labeled contract and have prices of each contract as of today labeled. The 2019 low has provided a pivot for a parallel uptrend line (highlighted in yellow) that has acted as a strong magnet since moving up off the covid crash low. Any of the lines could act as Support or Resistance. Further support marked in gray, risk area marked in red, and opportunity area marked in green. Deferred contracts can use the uptrend/downtrend lines or highlighted areas as well… April Cattle approaching Resistance/opportunity area, Risk is 128 – 132
CME:LE1!
by mtb1980
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!
by Tickmill
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 38.2% retracement sits Fundamentals: No Major News
CME:LE1!Long
by Genesiv
1
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!
by Tickmill
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!Long
by Genesiv
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!
by Tickmill
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!Long
by Genesiv
Live Cattle Futures ( LE1! ), H4 Potential for Bullish RiseType : Bullish rise Resistance : 151.925 Pivot: 146.650 Support : 143.300 Preferred Case: On the H4, with price moving in an ascending trend and trading above the ichimoku indicator, we have a bullish bias that price may rise from the pivot at 146.650 where the previous swing high sits to the 1st resistance at 151.925 where the 161.8% projection sits Alternative scenario: Alternatively, price could break pivot structure and drop to the 1st support at 143.300 where the swing low, overlap support and 23.6% retracement sits Fundamentals: No Major News
CME:LE1!
by Tickmill