March canola traded below the support of the November low at $479.60 per metric ton in the dying minutes of Monday's session, although while ending $3.60/mt lower by the end of the session, at $479.70/mt, did recover to close above the November low.
Speculation exists that a move below support could lead to stops being reached along with further selling and downside, although this scenario was avoided in Monday's trade.
The line on the first study on the chart shows signs of supportive commercial buying interest which helped to limit Monday' losses. The March/May spread narrowed $.40/mt to minus $8.40/mt (May trading over the March) this session, although this level of carry continued to reflect a bearish sentiment given that it represents roughly 73% of full carry.
Also saving the contract from further losses on Monday was the overall light trade volume taking place. As seen on the lower study, a reported 5,819 contracts traded in the March contract, down for the second straight session and the lowest volume trade seen since Dec. 31.
Prices may or may not survive a continued test of these lows. One other supportive factor is that prices do not tend to make large moves in the month of January. The continuous monthly chart shows that the March contract has lost an average of .26% in the month of January over the past five years and an average of .15% over the past 10 years.
Should we break below support and stops lead to further selling pressure, the continuous active chart would point to potential support in the $477.50/mt to $478.30/mt range, daily lows reached on the January contract in the month of December (not shown). A breach of this level could point to a retracement to November lows of $471/mt.
In the absence of favorable news on the demand front, the nearby contract remains vulnerable largely due to the vulnerable nature of the soybean market. The partial U.S. government shutdown remains an issue and prolonging the guessing game of what volume of soybeans was sold to China and what is actually being shipped. Disappointing news at the end of this shutdown will be sold.
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