Friday, February 21, 2014

EUA Dec14: Who stops the bulls?

The bull run continued this week as well and the increasing trend remained untouched. The EUA Dec14 hit a 1-year high on Monday, on Wednesday and Thursday as well with the highest price on Friday at 7.25 euro. Last time the contract visited this level was in December 2012. The RSI (80.8) was in the overbought territory during the whole month of February. Only coffee and US gas performed better during the same period.

Political factors (Council approval for back-loading on Monday and delay in allocations) can help the price to appreciate further despite screaming RSI. Next resistance levels can be found at 7.50 (weaker) and 7.75 euro (stronger).

If market bought the rumour (Council decision) and will sell the fact, we might see a correction. Support levels are at 6.90, 6.69 and 6.53. Moving averages are out of sight. (20DMA: EUR 6.32, 30DMA: EUR 5.90, 200DMA: EUR 4.89)

Friday, February 7, 2014

EUA Dec14: Consolidation expected after more than 30% appreciation YTD

The increasing trend channel that started mid-January remained intact last week as well and bulls received further impetus by speculators expecting the Parliament –plenary to pass the shorter scrutiny of back-loading. The EUA Dec14 hit a more than 1-year high on Thursday (shortly after the vote in plenary) at 6.74 euro. The huge rally from last week removed the price far away from moving averages (200DMA: 4.74 euro, 30DMA: 5.25 euro, 20DMA: 5.48 euro). The MACD is at highest level since July 2012 and the RSI at 79.9 indicates that the carbon is overbought at the moment. The above make justify our expectation for a correction.

In the lack of new highs former buyers might opt for tacking (at least part of) their profit and those industrial companies that are sitting on a surplus might reduce their expectations for prices at 8-10 euros any time soon and sell some allowances. Friday’s doji candle shows uncertainty of market participants regarding the next direction.

In the case of a correction the first support level is at 6.22 euro (a Fibonacci retracement level and the opening price on the day of the 1-year high). This is followed by 6 euro as a psychological level.