Canola drops hard, nearing major chart support

November 2016 canola at close on July 7, 2016. The single red line tracks the 200-day moving average. (Barchart.com)

CNS Canada — ICE Futures Canada canola contracts fell below nearby chart support on Thursday, hitting their softest levels in four months. There is more room to the downside, but the market is also looking oversold.

Fund traders were noted sellers on the move down, liquidating long positions and possibly moving to the short side in some cases, according to analysts.

The most active November contract settled Thursday at $462.30 per tonne, its weakest close since the beginning of March.

All of the major moving averages are sitting considerably higher, with the price having dropped over $60 per tonne over the past month.

The November contract hit a session low of $447.50 per bushel on March 2, which may provide a nearby downside target. After that, the contract low of $440 per tonne provides the next major support.

The plunge in canola has taken the relative strength index into oversold territory below 30 points, at 27.

If the oversold price sentiment leads to a corrective bounce, the first upside target comes in at about $475 per tonne, and then at the 200-day moving average around $487 per tonne.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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