Canada Markets

New-Crop Canola Breaks Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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November 2019 canola has seen price breach trendline support this week, losing $7.70/metric ton during the first two days. The green line on the second study shows the November/January futures spread close to unchanged this week, signaling speculative selling behind the move. (ProphetX graphic)

Since Aug. 1, the first day of the 2018-19 crop year, November 2019 canola has traded over a $22.40/metric ton range from a high of $508/mt to a low of $485.60/mt. The range narrowed even more from August 27 on, when the range narrowed to $17.40/mt, with a high of $503/mt.

This week's meltdown in global oilseeds and vegetable oils has weighed on new-crop canola. The November contract broke trendline support on Monday, in place since a September 2018 low, while extending this move further on Tuesday and breaking below the lower limit of the previous range.

Feb. 25 and Feb. 26 trade saw this contract lose $7.70/mt, breaching trendline support that's been in place since the Sept. 18 low. With the November/January spread close to unchanged this week, as shown in the second sturdy of the attached chart, speculative selling seems in control of price direction. The lower study signals Tuesday's daily volume being the second highest seen over the life of the contract. The minus $5.80/mt spread can be viewed as a neutral level of carry overall, perhaps an encouraging signal, as commercial traders show caution.

The continuous active November chart, which links one November contract after another, points to long-term support from weekly lows ranging from $471.80/mt to $473.70/mt, which may be the next possible area of support for current trade. Additional downside from the current level of trade is conceivable given that the first study shows that the stochastic momentum indicators have yet to fully enter oversold territory.

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