November canola ended lower for a third session, ending $12/mt lower at $721.70/mt. This brings this week's losses to $20.50/mt, after losing $9.90/mt in the week prior.
Today's move resulted in a breach of a sharply higher uptrend line drawn from the contract's March 31 low (blue line), while also dipped below the contract's 20-day moving average calculated at $722.80/mt.
Here's a glass-is-half-full view of this chart. The May 19 close was $17.70/mt higher than the session low, while today's close was just $1.10/mt below the 20-day moving average, which may in the end act to support prices in upcoming sessions.
Today's low of $704.10/mt remains above the low of the range traded over the past three weeks of $700.50/mt. In addition, the $700/mt level that once acted as psychological resistance may now act as psychological support.
While the short-term trend was broken today, the longer-term trend, such as the one drawn from the Oct. 28, 2020 low as seen on the chart remains intact, with support on this line at $603.20/mt, or $118.50/mt below today's close. Prior to this test, the 50-day moving average at $666/mt and the 100-day at $616.60/mt would need to be tested.
The brown line in the first study shows the November/January spread weakening a modest $0.40/mt this session and $2.10/mt during the course of the week to a $6.30/mt inverse (November over the January contract). During the past five years, this spread has traded at an average of a $5.10/mt carry, with the January trading over the November. This continues to reflect a bullish situation in new-crop positions.
November canola may also be overdone relative to other markets. While the November has fallen 6.2% from its recent contract high, August rapeseed has fallen 5.5% and October soybean oil has fallen 5.4%.
Last of all, while not shown, is a look at the October delivery basis as reported by pdqinfo.ca. From the May 6 high reached across the nine prairie regions monitored and the May 18 closing bids, basis has remained largely steady across the Prairies. Four of the regions saw basis weaken as much as $2.63/mt, while five of the regions saw basis strength as much as $2.03/mt. An average across the nine regions show no change at all over the past nine trading sessions despite prices being pushed lower.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
(c) Copyright 2021 DTN, LLC. All rights reserved.