Cattle Futures Breakout: Analyzing Bullish and Bearish Signals

ontem

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The recent breakout of cattle futures contracts above the $245 resistance, which had held since October 2014, has sparked significant interest. However, before this upward trend can continue, there are signs that a pullback might occur. With intriguing technical patterns unfolding, the question remains: Will the rally hold, or could the market face a short-term retreat before moving higher? Let’s explore the key technical indicators and what they could mean for us.

Breaking the Resistance and the Potential for a Bullish Trend
Recently, the price of cattle futures broke through the $245 resistance that had stood firm since 2014. This breakout paves the way for a possible bullish trend. The "cup n' handle" technical pattern is currently forming, suggesting the continuation of this upward movement.

The "Cup n' Handle" Pattern
The "cup n' handle" is a technical pattern commonly associated with bullish price movements. It forms with a rounded bottom (the "cup") followed by a slight consolidation (the "handle"). Once the price breaks above the handle's resistance, the market is typically expected to continue rising. For cattle futures, the projected target based on this pattern is $373, which represents a 52% increase above the October 2014 resistance.

Signs of Pullback: Watch for Bearish Divergence Patterns
Despite the positive outlook for a potential bullish trend, we should remain alert to signs of short-term reversal. Bearish divergence signals have started to emerge, suggesting that the bullish momentum may be losing strength.

The 3-Drives Pattern
Another technical pattern to watch is the 3-drives, which typically indicates an imminent correction after three consecutive upward movements. This pattern, combined with the bearish divergence, suggests the price may be due for a pullback. Should this correction occur, the price could retreat to around $209, which implies the recovery of the October 2014 resistance fractal.

As always, the markets offer both opportunities and challenges. Staying vigilant and adaptable is key, and the cattle futures market is no exception. Whether you're eyeing a potential rally or preparing for a short-term pullback, make sure to manage your positions with care and confidence.

Happy Trading,
André Cardoso