Technically Speaking

Energy Complex Rocked Thanksgiving Week

Heating oil found support at the 200-day moving average Friday and overnight, an encouraging technical sign. (DTN ProphetX chart)

January Crude Oil: Extreme selling pressure slammed crude oil prices lower last week with the spot month contract settling more than 13% lower during Friday's session. WTI crude oil's cousin Brent crude oil settled off more than 10% for just the 14th time in the contract's history. Selling was exacerbated once price pushed through the 100-day moving average as well as the 200-day moving average, the first time under the latter since Nov. 2, 2020. Light volume the day after a major U.S. holiday undoubtedly aided in the selloff. The move now begs the question of where support levels kick in with the first logical one being the 38.2% retracement of the 33.64 to 85.41 rally at $65.63. The recovery back above the 200-day moving average overnight is an encouraging sign. We are in the camp the move Friday was likely overdone, but if it wasn't, corrective lows from 8/23 at $61.64 will also likely add support. Because of the severity of the move, there will be little in the way of resistance on a corrective rally until the slight consolidation effort between $72.60 and R74.24. After that, former support-turned-new-resistance will be found at $74.76 to $75.30.

January RBOB Gasoline: Gasoline futures also suffered a dramatic selloff Friday, although previous price action offers a more optimistic view the contract will find support soon. The overnight bounce well off Friday's lows suggests the move was likely overdone. The January contract sliced through both the 100- and 200-day moving averages Friday, just like crude oil, but has a much larger climb to reclaim the 200-day than crude. The 200-day sits at $2.1596 early Monday morning. However, the August corrective lows at $1.8726 to $1.8730 aren't that far away should price fall further this week. Those August corrective lows also line up quite nicely with the 38.2% retracement of the entire $0.9702 to $2.4667 rally at $1.8950. While significantly above spot prices, resistance should be found at the $2.18 area, which was the consolidation level during the session Friday as well as support from Nov. 21.

January Heating Oil: Heating oil has a slightly different technical feel than gasoline and crude oil. Heating oil traded through its 200-day moving average but stopped near that indicator and settled just two cents below it Friday. The spot contract bounced off that indicator overnight and looks to be consolidating just above last week's lows. It would have been even more encouraging to see heating oil hold the former-resistance-turned-new-support from the June/July/August highs at $2.20, but that obviously didn't happen. There is a larger gap between spot prices and the August lows in heating oil than in gasoline, as those corrective lows are 15 to 20 cents per gallon away. Bulls would like to see spot prices turn sticky around Friday's settlement, which would coincide nicely with the consolidation effort from late August and early September. The 100-day moving average could act as resistance on a corrective rebound near $2.26. Of the three energy contracts, heating oil has the best prospects for a recovery attempt in our opinion.

Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.


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