Canada Markets

While the oat market has not shown the bearishness seen in other grain and oilseed markets, the March oat contract has struggled at the resistance of the 61.8% retracement of the move from the June high of $3.94 1/4 per bushel to the October low of $3/bu., which is at $3.58 1/4/bu. Prices have struggled at this level over the past four trading sessions and the uptrend which began on Oct. 2 at a price of $3/bu. has moved towards a sideways trade.

As seen on the attached daily chart, March oats posted a failed key reversal on Dec. 13, with a higher open and a further move to a new high in the direction of the upward trend, although prices then moved sharply lower and closed near the bottom of the daily trading range, as well as below the previous day's low. The reversal was not supported by higher volume as seen in the fourth study which is normally seen in a key reversal. Prices recovered the next two days, however, to keep the drive higher alive.

The move higher stalled after reaching a high just 1/4 cent short of the $3.58 1/4 cent resistance level on Dec. 27, with a failure to find buying interest in order to test this resistance level. Prices have since consolidated in quiet holiday trade, while the Jan. 2 trade led to a pattern known as an outside day, with today's trading range engulfing the range seen in Tuesday's trade, which is a sign of exhaustion in the market. This move was supported by the highest volume in seven sessions.

The third study indicates an ongoing bullish structure to the oat market, with the March/May spread trading at a 25-cent inverse, with the March future over the May, signaling that product is needed sooner than later. At the same time, this spread weakened 4 cents this session after closing at a high of 29 cents on Dec. 31, a sign of commercial selling and a less bullish fundamental sentiment.

According to Commodity Futures Commission data (not shown), non-commercial traders or investors in oat futures have been sellers in recent weeks, reducing their net-long position from a high of 2,828 contracts on Dec. 10 to a net-long position of 2,677 contracts on December 24, which is a four-week low.

Spill-over selling from the other grains may impact oat prices, while the move higher in today's U.S. dollar also weighed on prices. Watch for oats to test either side of an 11 1/4-cent range between $3.47 and a high of $3.58 1/4/bu. The March contract has largely remained above the low of this range since Dec. 17, while further support may exist at the 20-day moving average just below this level at $3.45 1/2/bu. should prices break below the lower end of the range.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

(ES)

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