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Supports are to come under renewed pressure

Published Monday, December 7th, 2015

The headline on Friday suggested that ICE was turning bearish and that NYMEX was negative. It was pointed out that there was nothing wrong with running short position on ICE and reduced short positions on NYMEX. Despite the bearish edge both contracts settled somewhat higher. Not much should have been read into this strength apart from the fact that it was a gentle pre-weekend short-covering. This view seems to be vindicated by this morning’s price movements which indicate that supports will be tested at one point. Effectively, the advice from Friday remains the same.

 

January ICE: All this contract managed on Friday was a test of the 8-day M/A. Neither this nor the more important 5-day were settled above so shorts are still short. For the record, these levels are currently at 38.37 and 38.41. Bears should only take losses if the higher of them is settled above. Until then it is very reasonable to anticipate further weakness and the eventual test of the 37.01/95 range support area, just above which short positions should be covered. These supports are the lows on the January contract on November 12 & 23. The chances of testing this support area will increase significantly in case the continuation lows at 37.90/75 at the end of August are broken below on a sustained basis today. With all the daily short-term M/As above the market and the daily slow stochastics negative there is no technical reason to believe that contract will strengthen. This view will only need to be altered on a close back over the highest of the daily short-term M/As.

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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.