This is just a quick note for anyone sold less than 100% Old Crop, 40% New Crop, or just feeling Undersold in general.
Canola is up today on some Macro stability (temporarily) and continued dryness in key Grain areas in the US. Look at the chart and you will see the Pennant pattern formed after our large move higher – meaning the bias is to break out of the pennant to the upside, but there is so much uncertainty and Fundamental “what-if’s, that it could go either way. It can probably be argued easily enough that it’s actually a Bearish Pennant in the Shorter Term.
With today’s close at $561 ($12.18) sitting right at the focal point of the pennant, we would have to call this price Fair Value for anyone looking to make a Catch-up Sale, or wanting to be sold more aggressively than our own 40% Recommendation at this level.
On a breakout, nearest Resistance is around $585 ($12.72) and likeliest Support is at $5.35 ($11.59), so there is a wide range that Canola might trade in on a breach, and whichever way it breaks, the normal volatility associated with these Pennant breaches will almost certainly test that downside or upside.
We value a breach to the downside as being 55% and thus slightly more likely but are holding to our 40% Sales position because there is still plenty of time for more Bullish events to play out before the marketing campaign is over. But in the Short and probably Medium Terms, this Breakout will be pivotal, just as it was at $530 when one broke out and gave us $2.50 a bushel higher prices in just 8 weeks.
Click on the chart below if you’re up for a slightly more complicated view and a way to play this from a purely Technical standpoint.