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Reversal or bull trap?

Published Monday, February 2nd, 2015

The headline question is on every trader’s mind. We bid farewell to January with a bang. A big short-covering rally pushed the prices much higher. The highest of the daily short-term M/As, the 13-day, was closed above on every contract, something that has not happened since the end of October last year. The daily slow stochastics are positive. The monthly supports not only held on every contract but Brent closed above the 52.25 correction point resistance that seemed very unlikely Friday morning. This morning, however, the energy complex is weakening again and it might indicate that Friday’s rally was a bull trap. This might turn out to be the case but as far as technicals are concerned the contracts changed track and based on Friday’s performance they are now bullish. If we accept this then we should also argue that in this case dips to support or closes over resistances are buys. The nearest of these supports are the 5-day M/As or in the case of WTI the 13-day. They are 46.67 on WTI, 50.41 on Brent, very close to the 50.45 range support, 164.76 on Heating Oil, close to the mid-range of Friday’s move at 164.67, 141.76 on RBOB, very close to the 34-day continuation M/A at 141.56 and 480.50 on Gasoil. If Friday’s positive sentiment is to be maintained then these supports should hold and dips back there are buys provided they are not closed below.

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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.