Canada Markets

November Canola trades Sideways

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The November canola contract has stalled at a high of $660.20/mt for a third session on Tuesday, while falling short of testing recent highs and retracement resistance at $663/mt. The 20-day moving average has crossed above its 50-day and 100-day moving average in the past month. (DTN ProphetX chart)

April 9 trade saw the November contract close $1/metric ton higher at $657.40/mt, after stalling at a high of $660.20/mt for a third consecutive session. Today's volume was sharply higher at 5,526 contracts traded in the November, the highest daily volume seen in seven sessions.

During the past three weeks, the November contract has traded over a $32.40/metric ton range, while trading within the previous week's range during the week ending April 5 with early trade this week showing a similar pattern.

For three consecutive sessions, trade has stalled at a high of $660.20/mt, while this is the third consecutive week that daily highs have shown a tendency to converge, starting with highs of $666.30/mt two weeks ago.

Resistance lies at $663/mt, the 38.2% retracement of the move from the contract's August high to February low. A sustained move above this level could result in a further move the 50% retracement, calculated at $685.30/mt.

It is interesting to note that during recent weeks, the upward-sloping 20-day moving average (blue line) has moved above the contract's 50-day moving average (green line) and the contract's 100-day moving average (purple line). This move could be viewed as a bullish technical feature, with a faster moving average crossing over a slower moving average, which can be viewed as an indicator of trend.

While not shown on the attached chart, noncommercial traders have reduced their bearish net-short position in canola futures for a fourth consecutive week to 92,606 contracts net-short as of April 2, now holding the smallest bearish position seen since late November. This group has pared their bearish position by 42% since reaching a record net-short position in March, while the current net-short position as of April 2 remains historically large.

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