Canada Markets

November Canola Bears Watching

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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November canola closed lower on Wednesday, consolidating within Tuesday's trading range as seen on the daily chart, signaling a pause or indecision on the part of buyers and sellers. As seen in the third study, the Nov/Jan futures spread has weakened $1.60/metric ton this week to minus $5.70/mt, a growing bearish response on the part of commercial traders. (DTN ProphetX chart)

Oilseed markets sent a number of mixed signals on Wednesday, with a higher close in soybean oil and palm oil, while soybeans and rapeseed finished lower. Canadian dollar strength was a bearish factor, with the spot dollar gain of 87 basis points against the U.S. dollar, given a move higher in crude oil and hints from the Bank of Canada that higher interest rates lie ahead.

November canola ended $2.10/metric ton lower at $525/mt, while consolidating in sideways trade within Tuesday's trading range as seen on the attached daily chart. After reaching a fresh contract high on Tuesday of $527.80/mt, November canola paused to form an inside-day trading bar, a sign of uncertainty between buyers and sellers, reluctant to test the previous day's high and low.

November soybeans reached a four-day low this session with signs of commercial selling pressure after reaching a fresh contract high on Tuesday only to finish lower while printing a bearish outside-day trading bar. Markets are reacting to seeding progress well-ahead of average in the U.S., forecasts pointing to widespread moisture coverage in the U.S. Midwest as well as increasing trade tensions with China.

As well, forecasts pointing to the potential for widespread precipitation across the Prairies could be the catalyst needed to push prices into a downtrend. Also note that the most recent AAFC supply and demand estimates saw a hike in estimated 2017-18 ending stocks of 500,000 mt, to 2.5 million metric tons, which would be 1.15 mmt higher than the estimated stocks at the end of the previous crop year.

A reversal signal on the daily chart could be signaled with a break below $522.90/mt on the daily chart on Thursday, which would signal a four-day low. A break below $514.50/mt on the weekly chart would signal the breach of a five-week low, while a breach of the upward-sloping trendline drawn from the August low at $513.40/mt would act as further confirmation.


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