Canada Markets

November Canola Holds Above Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Wednesday's move saw November canola find support at the 67% retracement of the $27.90/mt move from the March low to March high at $470.40/mt, while showing a bullish outside-day trading bar. The middle-study points to a supportive crossover of stochastic momentum indicators in oversold territory. The blue bars of the histogram on the lower study shows noncommercial traders paring their bearish net-short position in canola futures for six consecutive weeks to the smallest seen in 10 weeks. (DTN ProphetX chart)

Both old-crop and new-crop canola futures ended higher on Wednesday, diverging from the move seen across the soy complex and the rest of the grains, other than oat futures. Canadian dollar weakness played a large role in today's move. The nearby May ended $2.20/metric ton higher at $459.40/mt and the November closed $2.80/mt higher at $473.70/mt.

Both contracts found support at retracement support, while both printed a bullish outside-day trading bar on the daily chart, trading both higher and lower than the narrow ranges traded on Tuesday.

The November contract reached its lowest level traded in 20 days on Wednesday, with spillover pressure from soybeans and soybean oil trade, while bouncing from the 67% retracement of the move from the contract's March low to the March high, calculated at $470.40/mt.

Given further strength, potential resistance lies at the 33% retracement of the move from the March high to April low at $475.60/mt, while a breach of the four-day high at $478/mt would also send a bullish signal should this level be broken.

The second study on the attached chart points to a bullish turn in the direction of the stochastic momentum indicators, with the crossing of indicators while in oversold territory signaling a potential change in direction.

The blue bars on the lower study point to a gradual reduction in the bearish net-short position held by noncommercial traders, which has been pared over six consecutive weeks to the net-short of 41,660 contracts, as of April 7. This is the smallest bearish net-short position seen in 10 weeks.

Ongoing uncertainty surrounding the pending spring harvest on the prairies lingers, with concerns over both the quality and quantity of this harvest at a time when year-to-date exports are now trending ahead of last year's pace along with domestic use.

Planned delays in the release of Statistics Canada's March seeded acre estimates as well as the March 31 stocks report that would normally be released in early May will also extend uncertainty into the spring months. Market signals will play a greater role than normal in the coming weeks and months.

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

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