Canada Markets

Old-Crop Canola Bounces From Chart Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The continuous active weekly canola chart bounced from trendline support on Monday at $448.50/mt, leading to the March contract's first higher close in four sessions. Support at the 61.8% retracement also held at $449.50/mt. The lower study shows noncommercial traders adding to their net-short position in canola futures for the first time in seven weeks as of Jan. 27. (DTN ProphetX chart)

The old saying that markets take the escalator up and the elevator down is evident on the continuous active canola chart. The latest uptrend took from May 2019 to January 2020, a period of 36 weeks that saw a move from a low of $427.50/metric ton to a weekly high of $485/mt, a $57.50/mt move, while just over three short weeks, has given up $33.50/mt, or close to 61.8% of the original uptrend.

The nearby March contract reached a fresh contract low on Monday to start this week's trade, ending $2/mt higher at $452.50/mt. Psychological support at $450/mt held after prices dipped to their lowest level since Sept. 30.

Potential support lies at the 61.8% retracement level at $449.50/mt as well as the 67% retracement level at $446.50/mt. Should these be breached, weekly lows in the $445/mt level and then again at $437/mt may be key to preventing a move to the 2019 low at $427.50/mt.

This is seen at a time when noncommercial traders are viewed as increasingly bearish (lower study), with the blue bars on the histogram showing this group increasing their bearish net—short position for the first time in seven weeks to 40,167 contracts, the largest bearish position seen in four weeks.

In advance of Wednesday's Dec. 31 stocks report, the March canola contract fell on four of the past five Dec. 31 stocks report day, the largest drop being $3.60/mt. Over the past five years, the average move was a $1.46/mt drop.

Over the past two years, Dec. 31 stocks were reported to reach a record level each year, while the nearby March contract responded with a $1.50/mt gain in 2018 and a $1.30/mt loss in 2019.

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

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(CZ)

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