Monday, April 28, 2014

Follow up on German front year power from 8th April

As anticipated in our blog entry on 8th April the front year German power price reached the 35 euro level and hit a daily high at 35.10 euro today. The 35.10 euro level is a weak resistance, a daily low from 26th February.

The MACD is still in the negative territory, but RSI managed to come off the levels near 30 and is at 55 today.

The next resistance level is at 35.55 euro (a local high from 21st March).

Stop-loss orders for long positions can be put to the 20- and 30DMAs (at 34.64 euro and 34.37 euro respectively).

EUA Dec14: Will the 5 euro level wake up buyers?

The increasing trend experienced in the first half of April lost its momentum. Tuesday’s and Wednesday’s candles produced a tweezer top (short body with same high as prior candle) indicating a minor bearish reversal. The EUA Dec14 tested the upside and hit a local high at 5.92 euro last Thursday. The next day however saw the price plummeting from 5.75 to 5.50 euro within 3 minutes. 5.50 euro is the 30DMA. Bears dominated the market in late hours of the afternoon as well and the price fell below all averages, hitting a daily low at 5.04 euro and closing at 5.12 euro. 

MACD came closer to zero in the recent days, but Friday’s move pushed it deeper down into negative territory. RSI is at 41.6 (neutral).

Looking at weekly candles, last week produced an inverted hammer candlestick indicating trend reversal.

Vanishing demand means missing support for the price now and after the price fell below all the averages on Friday, the room is now open for further depreciation. 

Market participants might, however, find prices below 5 euro attractive enough to purchase allowances, which could lead to a retest of the resistance levels. 

Tuesday, April 22, 2014

EUA Dec14: Range-bound trading after breaking moving averages

Moving averages played table tennis with the benchmark contract last week. The EUA Dec14 closed above the 200DMA on 11th April and this moving average proved a strong support during last week as well. The 30DMA at 5.65 euro stopped appreciation on the three last trading days. 

The recovery since the end of March is untouched, but the momentum went lost in the last two days of trading. Volumes were also lower due to the Easter holidays. The MACD is still in the negative territory, RSI at 52 (neutral).

If compliance buyers turn back after the holidays, the price has to break and stay above the 30DMA at 5.61 euro (also a low from 17th March near here at 5.66 euro), before testing the 6 euro level.

If momentum winded, the 20 and 200DMAs could work as support at 5.27 and 5.21 euro respectively.

The benchmark contract seems to feel comfortable at around the 5.50 euro level and we might see a range-bound trading in the coming days with good entry positions between 5.00 and 5.20 euro and a chance for profit taking near 6.00 euro.

Monday, April 14, 2014

EUA Dec14: Shortened week with tightened supply

The EUA Dec14 moved sideways since the beginning of April in a range of 4.60 and 5.18 euro, the 200DMA stopping it from appreciating further. The range was first broken on Thursday, when the benchmark contract closed above the upper edge of the range. The momentum survived on Friday when the MACD crossed the signal line, confirming the reversal of the trend. The RSI is at 47, in neutral territory.

EIB sales are expected to end this week (Monday or Tuesday) decreasing the daily volume offered by one million. This is a week without UK auction on Wednesday and there will be no German auction on Friday either due to Good Friday and banking holiday in Germany.

If the price continues its path upwards, it has to brake the following resistance levels: 5.36 (the 20DMA), 5.56 (the 50% Fibonacci level), 5.66 (the low from 17th March) and 5.83 (the 30DMA).

In a negative scenario the support levels at 5.00 (psychological level), 4.58 (23.6% Fibonacci level), 4 (the low from 31 March and a psychological level) and 3.71 (the low from 28 March) can stop it from depreciating.

Tuesday, April 8, 2014

German front year power: Technical picture shows signs of revival

Looking at the chart of the front year German power contract we can find some sign of revival:

- The two candles from 28th and 31st of March form a tweezer bottom together the second candle being a short white one with the same low as that from the 28th.
- The dragonfly doji from the 3rd of April shows that market is hesitating and looking fo direction. The previous downward trend might brake.

Next day didn't confirm the trend reversal, but two days later the contract closed above 34 euro/ MWh.

The MACD is deep in the negative territory, but in the last couple of days it approached the signal line and a bullish crossover cannot be rolled out, but the increase is still fragile.

The RSI spent seven days below the 30 level (marking oversold prices) and returned to normal levels (33) yesterday.

Energy was, is and will be a huge topic for Europe's biggest economy. The way of the renewable transition leads through some mounds. After the financial crisis the protection of the industry became a priority and the decision taken recently that eases (or doesn't increase) the burdens of energy intensive companies shows that industry will be protected, no matter how much and what kind of energy they use.

The first resistance to break will be the 35 euro level. In a negative scenario the price would have to brake the low at 33.65 euro reached last Thursday.

Monday, April 7, 2014

EUA Dec14: Take a break

After the EUA Dec14 fell below 4 euro on 28 March and RSI into oversold territory, the benchmark contract recovered on Monday forming a bullish Harami candle. The momentum survived on Tuesday and the front year contract went above the 200DMA and closed above 5 euro. The optimism was short lived and Wednesday saw falling prices again. Thursday’s doji candle shows indecision, the EUA Dec14 is looking for direction.

The MACD is deep in the negative territory, the best news from last week is, that it didn’t dive further. RSI is in the neutral territory at 34.

In the lack of negative news that would provide more volatility to the EUA Dec14, the primary range for the price could be between 4.58 euro (23.6% Fibonacci retracement level) and 5.12/5.18 euro (38.2% Fibonacci retracement level/200DMA). It seems now that there is natural buying interest at around 4.50 euro that might support the price in the coming days, but we didn't get any real bullish signal recently. Sideways movement in the range mentioned above seems now the most likely scenario for the coming days.