Canada Markets

A Look at Old-Crop Canola's Upside Resistance

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The continuous active monthly canola chart shows the challenges ahead should canola break out higher. Should price close above $521.30/mt at the end of the month, which represents the 50% retracement of the move from the September 2012 high to the September 2014 low, a further rally could take place to the 61.8% retracement at $552.80/mt, although a number of monthly highs may lie in the way. (DTN graphic by Nick Scalise)

Last week's weekly close for the old-crop July canola contract of $523.90/mt placed price in the top one-third of the range traded for this week over the past five years, while DTN's Five-Year Price Probability chart shows that canola has only closed higher 18% of the time over this period. This could prove bearish for prices with the old-crop July struggling to sustain a move higher.

As seen on the attached long-term monthly chart, price is holding above the 50% retracement of the move from the September 2012 high to the September 2014 low, which is found at $521.30/mt (green line). This level has posed a challenge for prices in each of the past five months. The last time a monthly close was above this level was in November, which was followed by a bearish outside-month trading bar in the December trade.

A close above this level could result in a further move to the 61.8% retracement level at $552.80/mt, although resistance from previous monthly highs could be an issue. The most recent range of resistance lies between monthly highs of $534.80/mt, to $539.10/mt, while the monthly high from May 2016 of $544.60/mt remains yet another obstacle.

Note the lower study showing the long-term stochastic momentum indicators. While these indicators are trending higher toward overbought territory, prices have struggled to fully reach overbought territory (above 80%) since 2011.


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