November Canola Struggles at $480 Again
North American oilseed futures are seen stumbling this week, with August and November soybean futures failing to sustain moves above $9/bushel while November canola failed to sustain a move above $480/metric ton. All three contracts struggled with their respective 200-day moving averages, as well as a 50% retracement of their respective 2020 downtrend.
This week marks the third attempt to test resistance in and around the November canola contract's $480/mt level since late April. On May 19 and 20, the November contract reached a double-top on the daily chart at $480.40/mt. On June 2, a high of $479.50/mt was reached. The first attempt was followed by a 3.2% correction, while the second attempt was followed by a 2.4% correction.
Wednesday's trade failed at the contract's 200-day moving average at $481/mt, along with the 50% retracement of the move from the contract's January high to March low, calculated at $480.70/mt. Potential support may lie nearby with the 50-day moving average at $473.50/mt, the 20-day at $474.60/mt and the 100-day at $475.10/mt.
The stochastic indicators on the first study appear to be rolling over, while it appears these indicators will cross below the overbought region of the chart or below 80. This is not viewed as the most bearish of market turns, which are reserved for cross-overs taking place in overbought territory of the chart.
The blue bars of the second study show noncommercial traders increasing their bearish net-short position in canola futures to 44,029 contracts as of June 30, the first time this position has increased in four weeks. The speculative trade is slowly showing an increase in comfort level with the developing crop.
As indicated in today's Plains and Prairies Closing Comments, any move higher at this time of year can be viewed as a counter-seasonal trend. DTN analysis points to typical weaker futures trade experienced in the month of July as the crop develops. Over the past five years, the November contract has fallen four times over the month of July, averaging $17.26/mt lower, while ranging as much as $41.80/mt lower in 2016. Over this same period, the Nov. contract has fallen further in the month of August in three of the years, averaging $6.54/mt lower for the month over this period.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
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