Technically Speaking

Vegetable Oils in View: Canola, Soybean Oil and Palm Oil

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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After not showing much follow-through on new one-year lows in late 2018, the momentum of spot canola prices has now turned higher and coincides with bullish changes in soybean oil and palm oil prices. (DTN ProphetX chart)

March canola futures closed up C$4.30 last week at C$488.50, quickly recovering from a new low in mid-January that failed to attract further selling. On canola's weekly chart, spot canola prices also made new one-year lows in the fourth quarter of 2018, but were unable to take prices much lower and have now broken their downward momentum, turning the weekly stochastic higher as we near the end of January. Technically speaking, canola's price behavior shows the most bullish long-term support of the three vegetable oils as spot prices were only able to challenge their one-year low, while both soybean oil and palm oil got close to their three-year lows.

Soybean oil:

March soybean oil gained 1.02 cents per pound last week to 30.03 cents, its highest close in over three months. In that sense, one could argue that spot soybean oil is showing the greatest recent technical bullishness of the three oil prices as canola has not yet broken above its three-month high. Both soybean oil and palm oil were among commodities' four worst performers for the second consecutive year in 2018 with losses of 13% and 18% respectively -- conditions that give them higher odds for positive gains in 2019. As with canola, the weekly stochastic has turned higher for spot soybean oil and the monthly stochastic is also on track to turn higher at the end of January.

Palm oil:

March Malaysian palm oil closed up 75 ringgits last week to 2,265 ringgits, its highest close in over two months. Palm oil prices have seen a sharp rebound higher since November when spot prices almost (but not quite) matched their nine-year low of 1,863 ringgits. As mentioned above, soybean oil and palm oil were among commodities' worst performers in 2017 and 2018, but now show signs of breaking their downward momentum and are on track for bullish turns in their respective monthly stochastics in January. Technically speaking, it looks like vegetable prices are making significant bullish turns in early 2019.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

(BAS/BE)

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