Live Cattle Futures (CME.LC) dropped -0.4% during Wednesday’s session to close the day at $90.75 per lb., which also happened to be the intra-day low of the day. Cattle Futures also closed below its lower Bollinger band* for the second successive time on Wednesday.
Furthermore, cattle has been below an RSI (Wilder's Relative Strength Index) level of 30 for the past two trading days, suggesting that it is “oversold” and may be an indication to buy, according to the traditional interpretation. Is this a good time to buy the dip in price?
* The Bollinger band used here is the usual: a two standard deviation band width measured over the last 20 trading days.
Q: How has live cattle performed in the past, omitting repeat occurrences within 10 trading days, when, during the fourth quarter, it has closed below its lower Bollinger band for two days in a row while having an RSI level below 30?
A: According to the 12 previous occurrences of this event, EventEdge indicates that live cattle has shown a very strong bullish edge that peaks 13 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the most recent occurrence of the event (Wednesday, Dec. 26, 2007) is Tuesday, Jan. 15, 2008.
Live cattle rallies in 92% of the cases (11 of 12) by an average of 5.0% relative to the close on the event date. The average of the one decline is -0.4%. The overall return of the 12 cases is 4.6%, which, based on the close on the event date ($90.75), provides a target price of $94.925.
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HYPERLINK "http://www.markethistory.com/staff/detail.html?s=ronish" Ronish Patel is an analyst with MarketHistory.com.
