Canada Markets

November Canola Breaks From Recent Range

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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For the first time in 15 sessions, the November canola contract closed below its 20-day moving average while closing at its lowest level in 14 sessions. The line on the first study shows the Nov/Jan futures spread unchanged this session, a neutral stance on the part of the commercial side, while the histogram bars on the second study indicate that noncommercial traders have pared their net-short futures position over the past two weeks, but are quite comfortable with a near-record net-short position. (DTN ProphetX chart)

After a pause in trade in Thursday's session that resulted in a doji candlestick or bar formed, with the daily open of $453.10/metric ton (mt) equal to the daily close with price unchanged from the previous session, the November canola contract has closed lower in each of the past two sessions, losing $4.70/mt in total.

The November closed $1.50/mt lower in Monday's session, reaching its lowest level seen in 14 sessions, while closing below its 20-day moving average for the first time in 15 sessions. Since Aug. 7, the November has held between the resistance of its 50-day moving average and the support of its 20-day.

Given a longer-term view on the weekly chart, trade remains within a $19/mt range that has governed trade for more than eight weeks.

Noncommercial selling was behind the move on Monday given the Nov/Jan spread that remained steady at minus $7.80/mt, as seen on the green line on the second study. As can be seen on the blue histogram bars of the third study, noncommercial traders have slightly pared their bearish net-short position in each of the past two weeks, although at 80,505 contracts net short, remain close to the 83,829 contract net short reached in the week ended Aug. 6.

The lower study points to light activity on Monday, ahead of Wednesday's Statistics Canada production estimates, with a reported 8,066 contracts trading on the November contract, which compares to the 10-day average of 9,781 contracts trading. Increased buying interest may be needed to stop a further slide.

In cash trade Monday, Vancouver cash is reported at $15 over the November contract, down $5/mt from last week. On Aug. 24, 2018, this basis was reported to strengthen $5/mt to $25/mt over the November.

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