Monday, May 5, 2014

EUA Dec14: In the net of moving averages

Last week’s technical picture is difficult to interpret as volumes were not enough to confirm any signal technical indicators gave. 

The first days of the week provided a positive picture as the EUA Dec14 managed to break over the most watched moving averages, but the starting positive trend was annulled later in the week. The benchmark carbon contract closed on Monday on the 200DMA at 5.26 euro and started on Tuesday from the same level to close at 5.46 euro, above all moving averages. A new weekly high was reached on Wednesday at 5.54 euro, but by the end of the day the price returned to Tuesday's closing level. Trading volume was too low on Thursday (due to a public holiday in continental Europe) to give an interpretable sign, although the long-legged doji candle could have been a warning sign about hesitation of the market.

Friday’s close below the 200DMA should be interpreted as a negative sign. The European Commission said that less than expected credits have been exchanged for EUAs than expected which was interpreted by the market that installations would look for more credits in the next 12 months and demand for EUAs would be dented.

Today's open confirmed the negative picture, after the front year German power retested the 34 euro level in the morning hours after reaching 35.25 euro last week.

The MACD is still in the negative territory, but became a straight line in recent days. RSI at 44, neutral.

In a negative scenario, support levels can be found at 5.04, 4.58 and 3.71 euro. To the upside the EUA Dec14 will have a difficult task to break all the moving averages (at 5.28, 5.21 an 5.37 euro).

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