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Rich Nelson: Nothing bullish about high stocks

Direction: Having pointed out the good news for this week we can also discuss the issues that all traders must turn to when looking at supply/demand tables. Even after plugging in drought problems we are still left with burdensome stocks in the US and higher than normal stocks worldwide. What is bullish about this? This market may have a chance of hitting 775 on the December sometime soon but we cannot suggest this move needs to take out last week’s highs. We are neutral to bearish. Producers should be getting active in sales on this move…Rich Nelson

Working Trade: 

·      (08/09) Sold 1 Dec Chicago 900 call 29, risk to 47, objective 0. Closed 24. 

·       (08/11) Sold 1 Dec Chicago 870 call 26 5/8, risk to 44 5/8, objective 0. Closed 28 5/8. 

Lean Hogs: Some sources are suggesting packers do not have many hogs purchased for next week’s kill. That could continue the recent higher action seen in cash hogs. Probably a bigger deal is simply the general feeling of this market. Traders, and Allendale as well, wonder if last week’s tremendous decline in futures may have been a little overdone. On the charts there are two supportive things to note. 1) A double bottom on the October projects up to 75.70. 2) There is a gap from 75.80 to 75.95 which may need to be filled. Short term, this market needs a moderate rebound higher. In the big picture, this use move to sell. 

Russia to Restart Poultry Trade: A spokesman for the Russian agriculture minister announced the country would allow purchases of US poultry starting on Monday. They have agreed to buy from 68 of the 87 plants the US had proposed. This is good news for a trade that is simply tired of their double talk. You may remember earlier this summer an agreement was reached and trade was supposed to start in July. That was pushed back however when Russia then said they would need to inspect the US plants and then would need to file paperwork. For now, we must say this is good news for the US pork industry. Less lower-end chicken here in the US will help take some pressure off pork. This news was announced after the futures close. Look for higher trade on Monday based on this news…Rich Nelson

Trade Recommendation: 

·      (08/05) Sell October 76.00 ob, risk 1.50 from entry, objective 73.50. 

Working Trades: 

(06/04) Sold August 80 put 2.75, expired worthless today for +$1,100. 

Rich Nelson 

Director of Research 

Allendale, Inc 

4506 Prime Parkway 

McHenry, IL 60050 


Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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