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May Be Time To Buy October Live Cattle Based On Completion Of 11 Trading Day Down Cycle

(click to enlarge)Click to enlarge

Look at the Daily chart above of October Live Cattle. What you will notice is that Live Cattle likes to drop in predictable down waves. Back in Mach of 2013, I marked where we had an 11 day downtrend consisting of 4 hard down days, 5 days of sideways consolidation and then 3 hard down days again for a total of 11 days in the down move. However, in April, the chart above shows we dropped for 5 days, had 1 up day in the middle, and then continued falling for 5 more days. Notice that in the 5 down days the middle or 3rd day is sometimes up slightly, or down slightly, but in any case, it is so minor that I am still calling it a down day. Then in May we had 4 down days, 3 up days and then a final 4 down days, for a grand total of 11 days of downtrend. In late May and early June we had a 12 days downtrend that was choppy up and down. But recently, we just completed another 5 down days, 1 up day, and another 5 down days, for a total of 11 days of downtrend. If the recent past is any guide, Monday, August 5, 2013, should be an up day and we should consolidate in a sideways to higher pattern for a few days at least.

I believe that I have identified a tendency for Live Cattle to prefer a predictable downward movement of 11 days, with a preference for 5 down days, an up day, and another 5 down days, just like what has just occurred. It will be curious to watch and see if I can trade on this information and go long on Monday. You will notice from the chart that before turning up, we often make new lows. If we get weak on Monday and especially if we make a new low, I will be looking to get long with the expectation that we reverse back to the upside by the close. It will be fun to watch and see what happens.

Stocks: COW