Monday, January 27, 2014

EUA Dec14: ENVI vote on Thursday will be crucial

Last Monday started in a negative tone in the carbon market and the EUA Dec14 price tested the 30DMA at 4.91 euro. The retest happened on Tuesday again, but by the end of the day the benchmark contract closed in the positive territory. 
Thursday’s and Friday’s candles show a bullish engulfing giving more hope for those believing in back-loading. The 20 and 30DMA closed at the same level at 4.93 on Friday. If the price advances further, the 20DMA will cross the 30DMA from below which would be another bullish sign. 
There is still room for further appreciation based on the RSI as well being at 68. The MACD found comfort in the positive territory.
In the case of a correction the support levels are at 5.16, 5.00 and 4.93 euro. The closest resistance level is at the high from 16 October, at 5.62 euro. This resistance level is followed by 6.06 euro (a high from 18 September 2013).
Before political decisions we often see some kind of speculation on the outcome coupled with a profit taking after the decision. The result of the decision (as expected or not) defines the extent of the correction. Something similar might happen this week as well. The ENVI committee of the European Parliament will vote about objections to back-loading on Thursday. If the objections do not get enough support, rapporteur Groote might seek for shortening the scrutiny period in the Parliament. The market expects the ENVI committee to block the objections. Even Mrs Korhola who supports the objection confessed her scepticism about the objection to pass the ENVI.
Market opened in a positive mood today and this was reinforced by a strong auction that settled at highest price in four months (5.34 euro).

Monday, January 20, 2014

EUA Dec14: Busy week ahead makes carbon test important levels

The hammer from the 10th of January that closed above the 200DMA (4.58 euro) indicated a possible change in the price direction or a correction we envisioned on that day, but we didn’t count with a bull run experienced last week. 
The EUA Dec14 gained 12% w/w and hit a local high at 5.30 euro last Friday, a level not seen since 30 October 2013. The MACD crossed the signal curve on Wednesday and reached the positive territory on Thursday. This is a bullish sign. On Wednesday the price closed above the 20 and 30DMAs at 4.88 and 4.91 euro respectively that are now support levels. RSI increased steadily during the whole week to reach 64 on Friday (RSI above 70 signals asset is overbought).
Today we saw a correction to the 23.6% Fibonacci retracement level at 5.12 euro. For the rest of the day consolidation is expected. (All markets are relaxed today the US being on holidays.)
This week we will see important news flow from Brussels that can help the price testing support and resistance levels. (Supports: 4.53, 4.75, 4.90, resistance levels: 5.30, 5.62)

Friday, January 10, 2014

EUA Dec14: Time for a correction?

The benchmark carbon contract lost more than 4% w/w. The main reasons I can see behind this week's downward movement are:

- The uncertainty regarding the shortening of the scrutiny period as the start date of the implementation influences the amount of allowances to be back-loaded from 2014 auctions.
- The looming free allocation. Based on the status table updated on Monday it seems that the Commission tries to "speed up" the procedure. (OK. Let's say from snake tempo to turtle tempo.) And we are talking about 2013 allocation that should have happened until end of February last year. But what if the 2014 free allocation happens at due time? 
- This week we had interesting news from the coal market: Colombia withdraw the export license of  Drummond, one of the biggest exporters. This caused the price of coal for next month delivery jumping 2.5% on Wednesday and further 3.6% on Thursday.

The negative trend is unbroken since the end of December. The EUA Dec14 traded today already outside the lower Bollinger band and below the 200DMA at 4.58 euro. The MACD crossed the zero line on Tuesday sending a bearish signal. 

RSI, on the other hand, is at 36.5, very close to the oversold territory that starts from 30 downwards.  Latter might indicate that a correction is near. And the hammer formed today confirms this possibility.

Who knows if there would be a person in Brussels tweeting about (not) shortening of the scrutiny period?

The next resistance level is at 4.75 euro.

But please, don't forget about the updated status table on Monday and the more than 20 million EUAs auctioned. These factors increase the pressure on the price. Support levels are at 4.47 and 4.29 euro.

Friday, January 3, 2014

EUA Dec14: Low chances to go above 5 euro shortly

Although I have my reservations regarding technical analysis of an asset that is hardly traded, we can check what happened to the EUA Dec14 during this week. The candle of the 27th of December indicated already some hesitation and this week the price recorded a decline every trading day and reached a support level at 4.75 euro today. This proved a good support in December, and made the price bounce back today as well. 

After the continuous decline, however the MACD crossed the signal line giving the first bearish sign. The RSI didn’t follow and remained in neutral territory at 46.9. 

For the next days and weeks it will be critical if the 4.75 euro level can stop the price from declining further. If not, then the next support level is at 4.50 euro. In a positive scenario, the 4.85 euro level hast be retested first. Chances to go above the 5.16 resistance level next week are low.