November canola closed higher for a seventh consecutive session June 28, while the $30/metric ton (mt) or limit-move higher is the second $30/mt move seen in four sessions.
The brown line on the first study shows the Nov/Jan futures spread closing unchanged this session at a $3.50/mt inverse, the largest bullish inverse seen since June 4. This spread reached a high over the life of the spread of $9.80/mt (Nov above the Jan contract) as recently as May 13, while showing strength over the course of Monday's trade. The 15-minute chart shows this spread reaching a high of $8.90/mt this session.
The blue bars of the histogram on the lower study show the noncommercial net-long position as of June 22. The current net-long position of 1,349 contracts has fallen for three consecutive weeks and seven times in the past eight weeks and is down 97.8% from the 62,432 contracts reported for the week of Dec. 21. It is very possible speculative funds flow back into canola, providing upside momentum, although speculative traders may find themselves conflicted between a possible upward revision in seeded acres in Statistics Canada's June 29 acreage report and the extreme temperatures faced on the western Prairies this week.
Resistance lies at $784.40/mt, the contract high reached on June 7. Retracement resistance also lies at $783.50/mt, the 61.8% retracement of the move from the contract's April high to June low, as found on the continuous active chart (not shown). A breach of this level could lead to a move to the 66.7% retracement level of $793.60/mt. Should price move above this level, psychological resistance is seen at $800/mt, while weekly highs of $845.60/mt and $862.30/mt on the continuous active chart remain as potential resistance given a move higher.
Another way of looking at upside potential is when the recent sideways channel is considered. Over the past nine weeks, the November contract has traded in a range from $656/mt to a high of $784.40/mt. Technical analysis theory would indicate the breach of the upper resistance line or upper end of a channel can lead to a further move by an amount equal to the width of the channel. In this case, the channel width is $128.40/mt, while the measuring ability of a breakout from this channel would signal a potential upside target of $912.80/mt.
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Cliff Jamieson can be reached at email@example.com
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