Those of you who've been following me on Facebook for some time know that I've been keeping a close eye on Live Cattle for several months. Beside the many fundamental reason I've shared with you in the past, the weekly chart above should reveal why I'm technically fascinated with this commodity. The sideways base or period of consolidation that has been forming over the past few months is making the pain that was experienced during the last decline a distant memory. This is a key point to remember about bases or pockets of sideways movement. If they are too short, they don't wear off the affects of the most recent move. If they are long enough, the move that preceded the base has little to no ability to serve as heavy support or resistance in the future. I believe Live Cattle's base to be long enough to have worn off any negative impact established by the severe drop it endured in the middle of last year.
The breakout this week, while only two days old, is encouraging. If it holds and we experience follow-through next week, I believe we can firmly say, Live Cattle is truly on its way. That should be music to the ears of all the cattle ranchers who follow me. God bless you.
Let's look at the daily chart of Live Cattle.
The Reverse Head and Shoulders (rH&S) pattern I pointed out to you a couple of weeks back has evolved further. The upper neckline has now been broken, freeing it to move easily higher. Note how this rH&S pattern has four shoulders. There are also two necklines, one lower and the other upper, the latter of which I marked off on the chart. The dual shoulder'ed rH&S are particularly potent.
Again, even though the breakout seems clean at this point, it's still early, but the signs so far look very promising. Stay tuned.
