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Technical outlook: Test of resistances is expected

Published Wednesday, December 19th, 2012

We singled out two resistance levels in yesterday’s report that needed to be closed above for the technical picture to turn positive. They were two correction points: 108.38 on February Brent and 267.47 in January RBOB. Both of them were settled above after yesterday’s price strength so logically it means that further test can be expected on resistances. The general picture is undoubtedly positive. All the daily short-term M/As are below the current price action and the daily slow stochastics are positive. The odds are on higher numbers unless the above-mentioned two important correction points are closed back below. In that case the technical picture will turn neutral and it will only be negative if the short-term daily M/As are settled below. Now let us see the contracts separately. February WTI, which will become the front-month tonight after the close managed to close over its 61.8% c/p of the June-September rally, which is at 88.26. It means that the next target on the upside is 90.79, the 50% retracement level of the same move. It will remain valid unless 88.26 is closed below. The short-term M/As are between 87.62 and 87.23 and only a close below the lowest of them will be considered bearish. In a nutshell: watch 88.26 on February WTI. On Brent a close eye has to be kept on the crucial 108.38 correction point support. As long as it acts as a support this contract is expected to test its 100-day contract M/A at around 109.48 and its 200-day continuation M/A at around 110.38. Needless to say that a close back below the 108.38 level should send the price of this contract down to the 8-day M/A. It is currently at 107.62 but only a close below this support is bearish. On Heating Oil the 299.81/300.07 were tested but did not close above. The former is the 50% retracement level of the November-December downtrend and the latter is the 34-day contract M/A. It is being put under pressure again this morning and on a close above this resistance level I would expect further rally, namely up to the 61.8% c/p at 302.28. On the downside the 38.2% correction point of the same downtrend at 297.34 and the 5-day M/A at 297.55 are the first supports followed by the 13-day M/A at around 296.73, and finally the 8-day at around 295.81. A close below the latter would be bearish. On RBOB the settlement over the 267.46 correction point was certainly positive and now there is one more resistance that has to be negotiated before much higher numbers will be in the cards. It is the 100-day continuation M/A at around 269.52. On a close above this resistance there is every chance that we shall run up to the 274.49 range resistance. The short-term daily M/As on Gasoil are between 924.50 and 920.00. As long as this area holds the contract looks ok. It might help the bulls a great deal if 930.25/932.50 were settled above. This is where the 34-day M/As are. In between is the 931.50 correction point resistance and if this area were closed above, we are off to test the 200-day contract M/A at around 936.00. Of course, the euro, which is well above all of its daily M/As and is strengthening further against the dollar this morning supports the oil complex. At the moment it seems that the market wants to punch higher. This developing positive view will only change to neutral if the two supports (108.38 on Brent and 267.47 on RBOB) are closed below. The sentiment will only turn bearish if or when all of the daily short-term M/As on all contracts are closed below. Until this happens expect stronger numbers.



Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.