November canola closed higher for the fourth time in five sessions on Sept. 28, reaching the highest trade achieved in 10 sessions. The November settled $2.10/metric ton (mt) higher at $885.70/mt. Tuesday's trade found support at the contract's 20-day moving average (purple line), while also closing above the contract's 50-day moving average (red line) for a second time in three sessions. Tuesday's $16.90/mt trading range resulted in a move both lower and higher than Monday's trading range, while the higher close results in a bullish outside bar formed on the daily chart.
This week's trade is struggling with the $890/mt level, as well as the 50% retracement of the move from the contract's July high to August low, calculated at $886.10/mt (horizontal green line). A breach of this resistance could lead to a further move to the 61.8% retracement level of $901/mt, while psychological resistance at $900/mt may be a challenge in itself.
The brown line on the first study represents the Nov/Jan futures spread, which remains in bullish inverted territory and this inverse is seen strengthening. After reaching a low of $5.70/mt on Sept. 21 (Nov closing over the Jan contract) Tuesday's close was at $10.70/mt, the largest inverse seen since Sept. 9.
The blue bars of the histogram in the second study show the noncommercial net-long position growing in each of the past weeks as of the most recent date for Sept. 21. The bullish net-long position of 34,002 contracts is the largest bullish position seen since mid-February. It is interesting to note that the bullish noncommercial net-long position in soybeans has been pared in seven of the past eight weeks, while the noncommercial net-long position in soybean oil futures has fallen in each of the past four weeks.
Signals from both the commercial and noncommercial sides show a growing bullish view of this market. Tuesday's Dow Jones ICE Closing Review found in ProphetX quotes a trader indicating canola needs to stay "extraordinarily expensive and extraordinarily high" in order to ration tight supplies.
Agriculture and Agri-Food Canada's latest forecast shows stocks forecast to fall to 500,000 mt by July 31, 2022, representing 3.5% of use. According to USDA's Canadian data, this is the lowest stocks since 1997-98, while the lowest stocks-to-use ratio found in records going back to 1964-65.
The challenge is to determine what price will be needed to achieve the market's goal.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
(c) Copyright 2021 DTN, LLC. All rights reserved.