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TECHNICAL ANALYSIS


Heating Up

10/19/09 09:53:09 AM
by Austin Passamonte

Here's the short-term to near-term outlook for heating oil futures.

Security:   HO
Position:   N/A

We've entered what is usually a bullish fundamental period for heating oil futures. The Northeast and Midwest portions of the US rely heavily on fuel oil to heat homes and commercial buildings through the winter. By far the largest percentage of population lives and works within the colder zones where fuel oil is a necessity next to food, water, and air.

FIGURE 1: HO, WEEKLY
Graphic provided by: TradeStation.
 
Last year's colossal collapse came with irrational speculation from hedge funds, which was widely denied at the time and then widely admitted and confirmed after the crash. Meanwhile, the plunge from $4.50 to $1.50 per gallon was a huge relief to consumers (Figure 1). Since then, fuel oil has spent the past several months basing for a potential push higher. Double-top resistance near the $2 level is on a third attempt to press higher now. When it comes to multiple support and resistance tests, third time is usually the charm.

FIGURE 2: HO, WEEKLY
Graphic provided by: TradeStation.
 
July through September was one big flag-wedge type of consolidation pattern, upside break staged over the past five sessions at the time of this chart capture. Resistance at the $2 level is visible and notable, but price action holding above 1.90 support should chew through it eventually (Figure 2). A break back inside the visible wedge here negates upside potential should that happen.

FIGURE 3: HO, DAILY
Graphic provided by: TradeStation.
 
1-2-3 projection off the most recent swing higher shows the $2 gallon level as yet another layer of magnetism. Quite possible price hangs out here for awhile, or trades above and back down into it as multiple tests of prior resistance now evolving into support (see Figure 3).

FIGURE 4: HO, DAILY
Graphic provided by: TradeStation.
 
The same 1-2-3 projection label shows 2.12 and then 2.35 as the next immediate upside price objectives to some. One or both measures are probable soon if price continues its northward march. As frost settles into the northern parts of this country, seasonal pressures are ripe for price to move decidedly from here (see Figure 4).



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 10/20/09Rank: 3Comment: 
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