Technicals | Jun 16 2010
By Rudi Filapek-Vandyck
Many a trader has had to retreat from going short commodities and/or equities this week as last week's rally has not stopped at technical resistance levels, as would have been widely expected.
In addition to US indices closing above 200 day moving averages in last night's session, crude oil managed to break above stiff technical resistance too.
Technical market analysts at Barclays Capital are now talking about a reversal of the underlying trend. Considering crude oil futures are widely considered as an excellent gauge of global risk appetite, this could well bode well for other risk assets too, including equities.
The Barclays chartists have gone back to the drawing board. The result is a switch from staying bearish previously to now expecting this rally could go on for a while yet.
There are plenty of charactetistics to like about crude oil at the moment, the chartists argue. For starters the market is not overly positioned to the long-side, while sentiment has only just started to roll higher.
The initial target is believed to be US78.46/bbl, which is the 50% retracement of the US$89.77/67.15 decline, explain the chartists. Through this level opens the old range lows at US$83.60/bbl.
In case of any doubt: a sustained break, back through US$75.72/bbl is needed to warn of a false break.
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