Will A Three Day Energy Rally Continue?

On April 22, 2013 by TradingDesk

Energy prices are rallying for a third straight day, following their third straight week of losses. Both RBOB and HO contracts are now 10 cents higher than they were Thursday morning, although so far neither contract appears to be doing anything more than correcting an oversold position. The key test this week will be if the products contracts can break above resistance in the mid $2.80s and effectively end the bear market. Brent crude is also rallying this morning, breaking back above $100, and putting sellers on notice that while fundamentals and technical continue to favor lower prices in the future, these markets never move in a straight line for long.

Friday’s commitment of traders report showed what many suspected due to the heavy volume of selling over the past two weeks, that speculators fled from commodity bets, particularly in energy contracts. HO is now in a net short position (speculators are betting on lower prices), which has only happened a handful of time in the past 5 years. These charts continue to bear watching, as all of the other major contracts continue to hold large biases to the upside, and any more fleeing for the exits could trigger the next major sell off in energy prices.

CLICK HERE for a PDF of this morning’s charts

 

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