Canola running into chart resistance

Commodity News Service Canada — ICE Futures Canada canola contracts hit some of their best levels since August on Dec. 23, but ran into resistance to the upside to settle with small losses. The nearby trend remains pointed higher overall, but the lack of liquidity over the Christmas and New Year’s holiday season could lead to larger swings.

The most active March contract has posted gains of over $30 per tonne since the beginning of December, but appears to be running out of room to the upside from a chart standpoint. The contract briefly climbed above $443 per tonne on December 23, which is a level the contract has not closed above since August. However, profit-taking at the highs came forward to take values back towards their session lows near $436 by the close.

A general uptrend is still in place according to chart analysts. That could lead to bullish fund traders taking advantage of the thinner holiday volumes to add to their long positions and “goose” the market higher over the next week, according to some participants.

However, the underlying fundamentals are less bullish, with farmer selling expected to pick up in the New Year. Favourable South American weather conditions are also overhanging the oilseeds in general.

For March canola, the contract faces stiff resistance at around $444 per tonne. On the other side, the 20-, 30- and 50-day moving averages are all converging around the $425 to $430 mark, which could represent nearby support. After that, the December lows near $410 are a major downside target.

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