Canada Markets

Soy Oil, Rapeseed and Palm Oil Trade Sending Positive Signals

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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As of Wednesday's trade, the January soybean oil market closed higher for the seventh time in eight sessions, closing above the contract's 100-day moving average for the first time in more than four months. Stochastic momentum indicators continue to indicate an upward trajectory, as the market nears a test of its Oct. 22 high, as well as a test of the 38.2% retracement of the move from the June high to the August low.

The weakening Jan/March spread shows a growing bearish sentiment among commercial traders in the near future, although both the March/May and the May/July spreads are narrowing, indicating commercial buying and indicating a less-bearish sentiment later in the crop year.

Crude palm oil futures for February delivery, the current benchmark contract, printed a bullish gap higher in Thursday's trade (today's low is higher than Wednesday's high), while coming 1 ringgit of testing a nine-day high. This comes after the daily chart shows Wednesday's trade reaching the lowest level seen in two months while nearing support at the 50% retracement of the move from the August low to the contract's September high. Like soybeans, the weekly chart is very close to realizing a bullish outside trading bar on its weekly chart, depending on Friday's trade, while poised to post a higher weekly close for the first time in four weeks. Today's trade saw prices test their 20-day and 50-day moving averages, with this resistance being the challenge for this market in Friday's trade.

Dow Jones reports indicate growing concerns that production in Indonesia and Malaysia could fall for the first time ever, where 85% of the global palm production is generated. Production shortfalls are expected to be seen in the first half of next year, linked to dryness caused by the current El Nino event and a haze caused by fires linked to the burning of bush by plantations.

The February 2016 rapeseed contract on the Euronext market also posted a strong close Thursday. The market has pushed higher in each of the past three sessions, gaining 11 EUR to reach a 15-week high so far this week. Today's high also butted up against resistance of the 67% retracement of the move from the contract's July high to its August low at 395.98 EUR. Clearing this hurdle could lead to a continued move higher.

The rapeseed market is supported by commercial buying interest, with the nearby February/May spread moving from a weak carry of 1.50 EUR on Nov. 12 to a bullish inversion this week, closing at an inverse of 2.25 EUR (February closing over the May).

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