November canola closed lower for the fourth consecutive session on Monday, ending down $2.30/metric ton this session at $451.40/mt, with losses totaling $10/mt over the four sessions, while closing down $18.10/mt or 3.9% from the $469.50/mt high reached on Oct.9.
Monday's move breached the upward-sloping trend line drawn from the Sept. 10 low (see attached chart), while also moved below the 50% retracement of the move from the contract's September low to October high at $453.40/mt. Monday's close ended below the contract's 50-day moving average of $451.50/mt, after finding support at the 61.8% retracement of the move from the discussed uptrend at $449.50/mt as well as psychological support at $450/mt.
A breach of these support levels could result in a further slide to the 67% retracement of the discussed uptrend found at $447.90/mt. Further potential support on the weekly chart at $445/mt, a previous weekly low, will also be key to preventing a further slide to the September low.
The blue bars on the histogram found on the lower study shows noncommercial traders trimming their bearish net-short position in canola for five consecutive weeks to a net short of 58,674 contracts. Despite the delayed harvest and the threat of production losses that have resulted, speculators continue to hold a bearish position, while the week 10 record producer deliveries of 719,300 metric tons may do little to sway their opinion.
The red bars of the histogram on the lower study shows that commercial traders has pared their bullish net-long futures position for five consecutive weeks to a net-long of 23,916 contracts.
The lines on the third study point to conflicting signals linked to commercial trade on Monday, with the Jan/March spread narrowing or strengthening $0.20/mt to minus $9/mt (gold line) while the March/May spread shows the March/May spread weakening $0.10/mt to minus $7.70/mt (red line). The weekly chart shows both of these spreads weakening over the past week, a growing sign of bearish commercial activity.
Monday's fundamental signals are also seen as troubling, with the Vancouver cash basis weakening $2/mt over the past week to $18 over the November contract.
Cliff Jamieson can be reached at email@example.com
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