Tuesday, September 18, 2012

Can the CCC bring relief for carbon?

As expected, September started with an increased volatility, but until now the dark candles had a bigger body than the white ones. 

End of last week was very week in the carbon market and this week didn’t start strong either. The price of the EUA Dec12 contract fell below the 200-days moving average and couldn’t recover. In addition the MACD that gave a sell signal in the beginning of last week today fell below zero. Another bearish sign. 

The increasing trend channel started after the European Commission published its draft about back-loading was broken last week and the price heads south since then. Couple of news drew market participants’ attention (again) on the increasing supply by the end of the year (early phase 3 auctions, NER sales etc.). Expected transfer delays thanks to the software update of the union registry brought further sellers to the market.

Everything indicates further depreciation at the moment. The RSI is currently at 38.5, so there is some room left to the downside. The closest support level is at around EUR 7.0 followed by EUR 6.53 (a local low from end of July). The lower Bollinger band is at EUR 7.11 and the EUR 7.0 worked as a good support in the first weeks of August.

Although no decision is expected from the Climate Change Committee’s (CCC) 60th session tomorrow, positive comments might bring some relief for the prices. (Negative comments could cause further decline, of course.) Reaching the lower Bollinger band might also be a support.
In the case of a correction, the earlier support levels will function as resistance. These are at EUR 7.53 (200DMA), EUR 7.80 (30DMA) and EUR 8.0 (20DMA and psychological level).

Monday, September 10, 2012

EUA might change direction 27 times in the coming days (at least)

We had an exciting day today with the EUA Dec12 moving in an unusual wide range of EUR 7.80-8.50. After the significant price appreciation last week we expected some kind of correction in the morning (stock futures and depreciating euro indicated also a way downwards), but I don’t think anybody calculated with this extent of fall.
There were two pieces of news putting a downward pressure on the price:

- The European Commission (EC) announced having selected the German EEX for its early Phase 3 auctions. All in all 120mn allowances will be sold from last week of October. The only new information I the announcement was the platform, as the amount was known already months ago. The bigger than expected negative reaction shows how nervous markets are.
- In the afternoon Netherlands’ Infrastructure and Environment Ministry said it is unlikely to support the EC’s back-loading proposal as it would be an indirect disadvantage for the countries’ companies (meaning higher costs).

Although Netherlands has only 13 votes in the Commission and at least 91 votes are needed to block the back-loading proposal, the announcement was awarded with a 30 cents fall. This might be an indication on what’s coming in the next days /weeks. Any time a country says its opinion about the proposal, the price can move up or down depending if the country backs or opposes the back-loading.

With today’s move the EUA Dec12 price fell below the 20-days moving average at EUR 7.97 (IRSI fell to 31). If the price cannot return above EUR 8 today, a bearish engulfing would form in the chart (reinforced by a higher than average volume traded today) indicating further depreciation. In this case the support levels would be the 30-days moving average at EUR 7.70 and a local low at EUR 7.55 (the 200-days moving average is here as well). If all these supports prove inefficient, the price can fall to EUR 6.50.

In a positive scenario the price has to climb back above EUR 8.0 first and then the first resistance is waiting at EUR 8.50. The price tried to break above this level already three times.

We have to be prepared for everything, mainly for direction changes…

Tuesday, September 4, 2012

EUA continues to rise - two signals to go long

After rebouncing from a support at recent low of ~7.55 (double bottom) price quickly appreciated. We had one buying signal on the break out from 7.80 and the other @ 8.20 - although on the second one we did not add to the long position - despite the high volume on that candle (see chart below) becasue it is again very close to most recent high 8.46 which could not be broken last time.

Shoudl the price test the breakout from 8.20, you may consider adding to the long. Otherwise if it corrects to reach level of 8.10 we would exit the position with some profit.