Technicals | Mar 21 2011
By Rudi Filapek-Vandyck
It hardly has come as a surprise prices for natural gas have spiked higher recently. Increased demand from Japan is unlikely to push the market into deficit this year, but increased demand in itself has the potential to change market dynamics overall and this is what has triggered a swift reversal in overall sentiment.
The real story, however, remains in crude oil. Where other chartists have been warning about likely sell-offs in crude oil futures markets, technical analysts at Barclays Capital don't want to hear any of such predictions. They remain of the view that, from a technical point of view at least, crude oil futures are doing everything to keep the bullish picture alive. In the view of the analysts, WTI futures have found strong support above US$94/95 -described as the "breakout level"- while Brent managed to stay above US$103.35/105.60.
The team observes it would appear Brent is forming a bullish flag-like pattern on price charts, which signals a renewed uptrend lies ahead. The analysts report a close above US$117.30/bbl is now needed to set up another leg higher to US$118.50 and possibly a move to "important Fibo resistance" at US$123.70/bb (Fibo being short for Fibonacci).
Also, the analysts observe it would appear copper has stood its ground in the recent sell-off wave at around the lower levels of its Ichimoku Cloud. This, argue the analysts, doesn't mean copper will stage a new rally in the short term, but it does seem to indicate further losses should remain limited setting the metal up for a new rally later.
Reports the team at Barclays: a close above trendline resistance at US$9852/tonne is needed to pave the way for a return to the all-time high at US$10,190/t.
For readers who are not as yet familiar with the Ichimoku Cloud, here's some information borrowed from Investopedia.com:
Ichimoku Cloud is "a chart used in technical analysis that shows support and resistance, and momentum and trend directions for a security or investment. It is designed to provide relevant information at a glance using moving averages (tenkan-sen and kijun-sen) to show bullish and bearish crossover points. The "clouds" (kumo, in Japanese) are formed between spans of the average of the tenkan-sen and kijun-sen plotted six months ahead (senkou span B), and of the midpoint of the 52-week high and low (senkou span B) plotted six months ahead."
"The ichimoku cloud was developed by Goichi Hosoda, a Japanese journalist, and published in the late 1960s. It provides more data points than the standard candlestick chart.
"The overall trend is up when prices are above the cloud, down when prices are below the cloud and flat when they are in the cloud itself. When senkou span A is rising above senkou span B the trend is stronger upward, and is typically colored green. When senkou span B rises above senkou span A, the trend is stronger downward and is denoted with a red-colored cloud."
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
