Currently working on a last hard push on the 2013 J-MAS Marketing Plans. In meantime – here is a chart of some decent price action that looks to be granting sales opportunities in the mid-high $13’s once again. We are not expecting a large rally yet in Canola, but this is great bottoming price action and will be influenced by the very important Jan 11th USDA report. Great catch-up areas under the resistance levels. J-MAS remains 55% sold Canola and still content be there, though a move ahead of Jan 11th may be coming if Price Action or news out of Crop Production Show is not positive for Canola.
$537.50 on the March gives us a spot $11.89 bid into Assiniboia.
$519 on the November gives us an Oct $11.16 bid into Assiniboia
$538 marks an extremely important level. Other resistance levels are important sell points but a 38.2% Fib Retracement level is doubly important. Where normal resistance is a great sell point because it has the potential to mark a top or if broken to the upside, will often act as support and a position can be re-taken on the test of that support with only pennies difference from the previous sell.
But with a Fibonacci resistance level, especially the 38.2% mark, a failure to break through doesn’t just mark a top, it also reaffirms the previous downtrend the market is in and sets up for a leg lower. Where a normal resistance failure likely means a re-test of the lows with a good chance of holding them, a 38.2% failure likely means a new price coming that is substantially lower than the previous lows. See chart below for details on how this particular Fib Retracement was calculated.
In our current market, I believe the Fundamentals have improved enough that the low is in; for this reason I believe that the 38.2% level will be breached and thus $538 will be taken out and a steady move to $560 is very realistic. That is what I believe but until $538 is taken out and confirmed over a 2-3 day period, then we remain in a downtrend. The market will tell us by breaking through $538 that we can more than just believe that $560 is in play, and that even more importantly, a bottom is in.
Watch this level closely: if we breach the level, we can start thinking of $560 Canola ($12.30) but a failure here likely means we go to $480 ($10.60) and whatever we believed about the Fundamentals was false. If the new weather driven Fundamentals are valid, and I believe they are, then the market will tell us that and will take out $538. Price Action is your friend and will tell you what’s important.
A significant rally in Canola will drive an Acre Battle that will be Bullish for all crops we grow.
$534 on the March gives us a spot $11.81 bid into Assiniboia. I’m a small Seller today.
In front of a decently important USDA report tomorrow morning it would be remiss of me not to take the $11.81 that’s in front of us and roll the dice on a good report for just another 10 cents. I therefore will be moving sales up by another 10% today on the spot month contract – moving to 75% sold Canola.
I believe the report will be mildly Bullish and the Charts are certainly in our favour, however risk is present on four fronts: 1) Expectations are for a Bullish report and so limited upside without a strongly Bullish report. 2) Big rains in Argentina are being ignored and could become a focus once report is out of the way. 3) The Outsides are getting overbought and Greece is playing politics – and have a few years of experience on that front. 4) Technically we’ve broken a pennant to the upside, but have not confirmed a takeout of the January highs so any drop here will install a pretty solid double top at an already strong Resistance plane.
Targets out imminently – this note is background on the forthcoming Canola recommendation. All things being equal, if it was not a report day tomorrow, I would not be selling today – hence 10% instead of 15%.
$533 on the March gives us a spot $11.77 bid into Assiniboia.
$533 was the high set on Jan 9th prior to the USDA on the 12th and a level we have not seen otherwise since Nov 16. $538 marks 38.2 Fib Retracement and while that has been my medium term target since late November, we must respect that 533 is possibly close enough especially in front of a USDA report on Thursday that many are calling for to be Bullish (and thus it had better be Bullish or we likely go lower, leaving a solid double top in place).
If adverse weather in E. Europe, S.American and locally in the Prairies continues, there is potential still to test $550 – 560, so I am only a seller of 50% of my remaining bushels in the 533-538 range, and will ponder the velocity of the move to $550 on the remaining tonnes if it were to occur.
While a breach of $533 should provide a spring board for Fund entry and a nice support level, $538 ($11.88) is a significant resistance level and a critical point in breaking (or more importantly – maintaining) the downtrend. A failure at $538 could result in a test of the $500 lows and a good chance of seeing $480 March or May futures ($10.55 Canola)
Bottom Line – Good sell points ahead but beware Thursday’s USDA. You should not exit the next 2-10 days without getting yourself to 75% Old Crop and possibly as high as 35% New Crop or any combination of 100% Old & New Crop. More on that in this afternoon’s Targets.
$$CanolaMPU – Strong 2 day performance since Friday’s StatsCan and resting now at 530, two dollars above the pennant formation and so likely a breakout.
Should see Jan top of 533 challenged and taken out and then my long term target of 538 attacked. Be nimble as any of these points can become a top if the Outsides top out or Beans fails to take out the same Pre-USDA high.
If 538 is taken out, 550 is immediately in play and a chance then at $12.00 Old Crop or $11.35 New Crop and they really must be sold.
Targets out tomorrow. Currently, my plan is to move to 80% sold at $538 futures or roughly $11.80.