Posted on May 15, 2017 in Animal Fats & Oils

Yellow Grease Grinds Higher as Momentum Continues to Surge

Yellow grease prices remained stable and continue to grind higher having increased by more than 11% in 2017.  Prices are bumping up against resistance near the Bollinger band high which is 2-standard deviations above the 20-week moving average at 25.  Support is seen near the 20-week moving average at 23.75.  Prices have benefited from strong demand for vegetable oil which has kept prices of animal fats buoyed.  The slow increase in the Bollinger band width reflects rising historical volatility.

The weekly relative strength index (RSI) continued to climb higher this past week which reflects accelerating positive momentum.  The RSI is a momentum oscillator that measures accelerating and decelerating momentum, along with overbought and oversold conditions.  The current reading on the weekly RSI is 77, which is well above the overbought trigger level of 70, which could foreshadow a correction in prices.  Despite this relatively high level, the RSI climbed as high as 91, when yellow grease prices surged in April of 2016, which means that momentum can continue to drive prices higher.

Momentum as reflected by the weekly MACD (moving average convergence divergence) index is positive. The MACD is also a momentum indicator that measures momentum by evaluating the difference between two exponential moving averages.  As this differential accelerates it can generate a crossover signal, which occurred in January of 2017. The index is printing in the black, and the MACD histogram has a positive trajectory which points to higher prices for yellow grease.