Hog Prices Seen Rallying on Double Bottom: Technical Analysis

Hog futures are poised to extend this month’s rebound after reaching a “double bottom” last month, according to technical analysis by commodity advisory firm Brock Associates.

The contract for July delivery on the Chicago Mercantile Exchange may reach 95 cents to 96.5 cents a pound in “the relatively near term,” said Doug Houghton, an analyst at Brock in Milwaukee. Prices are up since the contract reached an eight-month low of 87.825 cents on March 20 and a low on April 15 of 88.275 cents. The two prices make up a double bottom in a pattern that shows a drop, a rebound and then another slump approaching the previous low, usually signaling support.

“The market obviously did put in a significant low,” Houghton said in a telephone interview. “From a technical standpoint, it’s certainly possible that we could go back to that 96-area.”

While there’s some resistance at 93.75 cents, there’s a potential for prices to reach 96.5 cents, Houghton said. The July contract also this month closed above its 50-day moving average of 91.1 cents, and its 100-day moving average of 92.845 cents, which is also bullish, he said.

Futures for July settlement rose 2.6 percent last week to close at 93.3 cents on the CME. That marks the biggest weekly gain this month. The most-active contract is up 8.8 percent this year. Funds increased bullish bets by 8.3 percent to 34,278 futures and options contracts in the week ended May 21, the highest since February, government data show.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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