Monday, March 31, 2014

EUA Dec14: The case of the falling knife

The decline anticipated two weeks ago when the 20DMA crossed the 30DMA speeded up last week. In the first three trading days the low from mid-March at 5.66 euro could support the price, but the level got broken on Thursday when Spanish installations received their 2014 free allocation and European power prices reached 2007 levels. The EUA Dec14 plummeted to the 200DMA. The movement was very big in a very short time, and the RSI slipped below 30 indicating oversold price.

This didn’t bother sellers on Friday who pushed the price below the 200DMA, below the 5 euro psychological level and even below 4 euro. The RSI fell to 23 and the price dived below the lower Bollinger band as well. The low touched on Friday (3.71 euro) is at the 76.4% Fibonacci retracement level taking into consideration the historical low from last April and the high reached beginning of March 2014.

For the last seven months the 200DMA proved a good support, but after Friday’s fall it became a resistance level. Before that the 4.45 euro level has to be broken. (The first attempt of today was unsuccessful.)

In a negative scenario the 3.38 euro (the low from July 2013) and the historical low at 2.60 euro are the support levels, if the low hit on Friday (3.71 euro) breaks again.

It is difficult to see any demand in the near future. I suppose that installations are covered for 2013 already. Auctions get less and less bids. The cover ratio that on the last EU auction reached 9, fell today to 3 and the number of bidders also fell from the 18-19 earlier to 13. 

Contrary to earlier assumptions not industrials, but utilities could have appeared on the sellers' side. Those who sold power forward and buy back now due to mild weather and low prices, unwind their hedging positions in the background. Also Polish utilities were informed on Friday that they might receive derogation allowances before the compliance period ends and those who bought in times of uncertainty could have reduced their open positions.

Monday, March 24, 2014

EUA Dec14 comfortable at 6 euro for the time being

Last Monday saw the support level at 6.18 euro break and the EUA Dec14 fell to 5.66 euro, a level last seen on the first trading day of March. The RSI fell to 38 on that day. The benchmark contract had a declining path on Tuesday as well, but it didn’t reach the low from Monday, it stopped at 5.71 euro. Wednesday marked the first day of increase after seven black candles. 

Last Thursday’s doji candle indicates some hesitation, but the 20DMA crossed the 30DMA from above which is a bearish sign. 

The price left a 3 cent gap in Friday’s opening between 6.09 and 6.12 euro that will work as a support in the future. The first test happened today already, but the support held further declines in the morning.

The MACD is in the negative territory, but didn’t fall further on Friday. 

The RSI picked up and ended the week at 47. It seems that the benchmark contract feels comfortable near the 6 euro level. The next factor that could have a major price impact is the release of verified emissions data for the year 2013. The European Commission will publish the data in 1st April, at noon time.

Support levels can be found at 5.16 euro (the 200DMA), at 5.66 eur (the low from last Monday) and at the gap (6.09-6.12 euro) left last Friday.

6.25 euro proved a strong resistance level until now. If broken, the 20 and 30DMAs (at 6.53 and 6.62 euro, respectively) can halt the price appreciation.

Monday, March 17, 2014

EUA Dec14: Below 6 euro again

The EUA Dec14 lost 8.9% last week in a downward trend that hit its local low at 6.24 euro on Friday after falling below the 30DMA on Wednesday. MACD turned down as well, but it is still in a positive territory. 

Friday’s last two (uptick) candles on the 10-minutes charts might have made us cautiously optimistic regarding this week as low auction volumes reduce the supply side of the market.

Monday started in a relatively good mood, the record cover ratio of the first EU auction affected by  back-loading however had a short time positive effect on the price. The EUA Dec14 broke the 6 euro level at around noon time and didn't halt until 5.66 euro as plenty of stop-loss orders might have been triggered. This is close to the 61.8% Fibonacci retracement level at 5.63 euro. Prices below 6 euro, however seem to be attractive enough for some buyers and the afternoon brought some recovery to 5.96 euro.

The overall picture went bearish. The price left the increasing trend channel that started in January on 25th February. The benchmark contract traded in a range between 6.30-7.40 since then, but today it broke out  downwards from this band. The next support level is at 5.45 euro (the 100DMA) followed by 5.21 euro (a Fibo level). The RSI was at 38 when the market closed today, so there is still some room for further depreciation.

In a positive scenario (if for example the extension of the Stop the clock proposal gets rejected by the ENVI on Wednesday and airline operators have to purchase urgently), the price might climb back above 6 euro. 

The 38.2% Fibo level at 6.31 euro and 30 and 20 DMAs (at 6.66 and 6.77 euro, respectively) will be the resistance levels in this case.

Monday, March 10, 2014

EUA Dec14: Market to be tested by first truncated auction on Wednesday

Despite the positive mood in the opening on Monday, the EUA Dec14 fell to the 20DMA at 6.68 euro before the market closed last week. On Tuesday the 30DMA at 6.38 proved a strong support, but by the end of the day the price managed to climbed back near 7 euro. Wednesday and Thursday produced two doji candles wobbling on the 20DMA. Buyers invaded the floor Friday afternoon and pulled the benchmark carbon contract above 7 euro, but the fact that it couldnt close above this level is a sign of weakness . RSI was in neutral territory (60) on Friday.

This week the price is expected to be driven by the speculation on Wednesday’s UK auction, the first one with reduced volume. The next resistance levels are at 7.15 (price plummeted from here last Monday) and 7.41 euro (the high from 3rd March).

After the auction the possibility of a correction cannot be ruled out, but downward movements can be halted by support levels at 7 euro, 6.78 euro (20DMA), and 6.49 euro (30DMA).

Tuesday, March 4, 2014

EUA Dec14: Head and shoulders?

After today's low of 6.38 euro a head and shoulders formation seems to appear in the EUA Dec14 chart.

  • installations - in preparation for back-loading - have built up their stockpiles already, 
  • the 2013 emissions data reflect something similar to RWE's FY results
we can see prices falling in the next month. The technical formation leads to a target price of 5.29 euro. Not exactly what we (and politicians) expected from back-loading.

Monday, March 3, 2014

EUA Dec14: RSI came back to normal levels, but buyers still dominant

The one-month increasing trend stopped last week after the European Council absolved the last necessary step in the process of back-loading. On the day of the decision the benchmark contract hit 7.33 euro, but later only the 7 euro level could maintain the price fall, and on the next day the EUA Dec14 fell more than 11% and closed below the 20DMA. MACD produced a bearish crossover on the same day. Wednesday also started in a negative mood, but the price managed to post a d/d gain and closed above the 20DMA. Next day saw prices treading water, only the afternoon saw some buyers arriving to the market. The publication of the amended auction calendars made the EUA Dec14 open with a gap (6.57/6.70 euro) on Friday and the price climbed back above 7 euro again. 

The MACD turned back north, but didn’t cross the signal. The RSI – after falling to 51 on Tuesday increased to 64 on Friday.

Should the positive mood persist, the next resistance levels are at 7.14 euro (the opening and maximum price from Tuesday from where it fell 11%) and 7.33 euro (the local high hit on Monday). After this level there is open room to increase to 8 euro.

If more installations receiving their allocation opt for selling, the next support levels can be the gap left on Friday (6.57/6.70 euro), 6,18/6,20 euro (the low from Wednesday and the 30DMA).