HighGround Dairy Monthly CME Dairy Futures Technical Review – October 10, 2013

CME Class III Milk Futures Class III Milk maintained its sideways trading range into early October and on a track for swing high resistance at 18.82. The market has experienced extreme range contraction, with the last seven weekly closes falling within a very tight 0.36 range. This coiling action is indicative of dynamic breakout moves ahead. The market has shown respect to a downtrend line draw from the October 2012 high, with price currently testing that level for the third time. It is possible that the current range contraction trade is becoming more accepting of the higher prices, building energy for a further push above that line. Based on the advance off the June low, the December Class III Milk has upside targets coming in at 17.57, and potential 18.45. Weekly support comes in at 17.55, then 16.92.   CME Class IV Milk Futures CME Class IV Milk Futures Price action over the last month for Class IV Milk confirmed a breakout above 20.00 and points to higher prices ahead. The market spent the last three weeks holding above that level, suggesting that the market accepted the higher price levels. This confirms a breakout from a 13-month ascending triangle pattern, highlighted by deliberate and symmetrical moves toward resistance. Further validation of higher prices came from the expansion in open interest and trading volume during the drive higher. This sets the market up for a challenge of the June 2011 high of 20.90, with further upside potential coming in at 21.50. These upside target levels correspond with 20.96 basis the December Class IV Milk contract and 19.70 for the January contract. A slide back below swing low support at 19.17 would violate the upside potential. This support level corresponds with 18.27 in the December contract and 17.50 for January Class IV