Canada Markets

Oilseed Markets Respect Fibonacci Support Levels

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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So far this week, canola, soybeans and soybean oil futures have either tested key Fibonacci retracement levels or have come close to it. The January canola contract has found support at the 50% retracement of the rally from its Nov 25, 2011 weekly low to its September 14, 2012 weekly high, at $570.60 per metric tonne, which is its Tuesday low. (DTN graphic by Nick Scalise)

So far this week, soybeans, soybean oil and canola futures found technical support at key Fibonacci support levels, providing hope that the bottoms are in, given the gut-wrenching sell-off which has taken place since last Friday's WASDE report was released, where the overall size of the U.S. soybean crop was increased.

The January soybean market closed in on its 61.8% retracement of the contract's Dec 14, 2011 weekly low of $11.26 3/4 and the contract's weekly high of $17.81 3/4 per bushel on Sept 4, 2012, the retracement level being $13.77/bu. So far, this week's low has been $13.91 1/4, coming within 14 1/4 cents of the support level before turning higher.

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Soybean oil futures for December also tested a key technical support level this week which proved to hold the future from further downside. The December contract tested its 50% retracement of the rally from its July 6, 2009 weekly low of 33.96 cents to its May 31, 2011 weekly high of 60.02 cents. This 50% retracement level is at 46.99. This level was tested both Monday and Tuesday of this week while both closes took place above this point.

January canola futures have also held at a 50% Fibonacci retracement level this week. As seen on the accompanying chart, this level is $570.60 per metric tonne, and is the 50% retracement of the contract's rally from its weekly low for Nov. 25, 2011 at $483.60/mt to its September 14 weekly high of $657.50/mt. This week's low was exactly $570.60/mt, which is equivalent to the retracement level.

There was positive news across the oilseed complex today. Malaysian palm oil increased 4.7% on higher-than-expected exports to both China and India, during a time when seasonal production tends to slip. Export sales of both U.S. beans and oil were announced, while greater-than-expected domestic soybean crush data was released in the U.S. The discussion regarding the tightness of stocks and the need for rationing in order to supply product until the South American crop is harvested was once again on the table. Concerns exist that supplies do not get rationed at cheaper price levels.

While a Dow Jones newswire suggested the highs may be in for the canola market, this week's market is perhaps also suggesting that the lows for this fall are also in place.

Cliff can be reached at cliff.jamieson@telventdtn.com

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