Live Cattle futures have been on a steady move higher since price bottomed in early April. Like price, sentiment moved higher during that move – bottoming at 8% Bulls on 04/03 and peaking at 93% Bulls on both 08/11 and 08/12. Even though price continued to move higher through 08/14, sentiment dropped to 85% Bulls – that type of divergence always catches our attention. In this case, we think this setup gives us a nice short opportunity.
Here are the filters we used to develop our trade plan:
- DSI: Close between 80-90% Bulls
- Five-Day Price Change: Gain between 2.3-4.3%
- Two-Day Sentiment Change: Loss between 6-10% Bulls
Since 2006, this setup has happened only five other times: 04/04/11, 01/17/14, 06/27/14, 11/18/14, and 03/17/16.