Thursday, February 2, 2012

Broader view on carbon

Since the EUA are gaining in value day after day, it is worth to have a broader view on the situation and look for the posibile mid-term directions.















(1) We see that since June carbon was moving in a wide bearish trend - with corrections. We had a bounce from 13.00 EUR , 12.45 EUR and 11.20 EUR levels. The last one was substantial as it lasted for 2 months and kicked back the EUA to 14.00 EUR.

(2) The price plummeted reaching all time lows of 6.30 EUR in December last year - trading with "ups and downs" (corrections) within the corridor.

(3) Recently market is experiencing healthy growth - supported by rising power prices and gas prices (which theoretically makes the more polutive coal power generation economically more attractive, creating demand for EUA).

Worth noticing is that during (1) the traders were rather looking for the peaks (heights) from which the market could reverse, whereas (3) seems like the market (players) found a bottom from which it can grow.
It can be confirmed by the "W" shape of the chart in the past 1.5 month.
Also the price broke above 50 day Moving Average (green light line) and on top of that broke out of the corridor.

Now, we have put three levels, which we believe can be crucial for further price development - they simply represent the resistance levels concluded based on historical price movements. There is also a 100 day Moving Average line drawn (red light line).

Please note the price is likely to meet the 100 day MA at the drawn resistance of 9.20 EUR, which can be hard to get thru. On top of that, if we continue like this until that level, most likely the RSI (Relative Strenght Index) will reach 70, value where most trades consider the market as overbought and would sell (whether to take profit or to open speculative short positions).

Time will tell - rather sooner than later.

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