Live Cattle Looks Bullish - Exit

Today ended with a doji but the open and the close were both under the 8ema. That's a little bearish. The doji candle represents indecision. The next decisive candle will resolve whether we continue down or up.

The previous 3 candles form an Evening Star pattern. That's bearish.

Looks like we made a new lower swing high. That's bearish.

We never cleared the previous swing high at 115.45. So really, we should have waited to close above that before entering. I was somewhat aggressive here and broke that rule. So I can't really complain if we make new lows before making new highs, if ever.

So, given that we got in too early and these other bearish indications, the best decision seemed like exiting here to limit our losses. We can get back in after we see how the doji is resolved.

Summary:

Entry 113.025

Exit 112.80

Loss .225 * $400/pt = -$90

A very reasonable loss considering this futures contract covers a lot of ground. For example, just 3 trading days ago we hit a high of 114.70. 114.70 - 113.025 = 1.675 * $400/pt = $670.

Here's another thing. If our hedge order was filled (see "Live Cattle Looks Bullish - Update 1") we'd be ahead. Our limit order was for $500 premium. Today's last trade for the 118 Call option was .825 * $400/pt = $330. If we covered our short position there, we would have made $500 - 330 = $170 on the hedge. Then we would have netted 170 - 90 = $80 instead of losing $90.

Paraphrasing Adele, sometimes it lasts in trading, but sometimes it hurts instead.