Monday, August 10, 2015

EUA Dec15: Low auction volume failed to support the price

After falling 2.4% on the last two days of the previous week, the EUA Dec15 had a positive start to last week and gained 1% in Monday’s trading. Tuesday’s opening was also strong, mainly helped by higher German power prices. The EUA Dec15 climbed briefly above 8.00 euro. The chart contains, however, two warning signals making traders more cautious about buying carbon: the MACD crossed the signal curve on 31st July and the candles from the 29th and 30th July formed a bearish engulfing.

As the bearish signals seemed to kick in, the EUA Dec15 was not able to maintain gains and closed at its daily low at 7.91 euro on Tuesday, 4 cents lower than Monday’s closing price.

In a very thin trading, the EUA Dec15 tested the support level at 7.85 euro several times on Wednesday. As a consequence, the support got weaker and weaker, until it broke in the last minutes of trading. Traded volume was low during the whole day, and increased only when the support level was broken as there might have been stop-loss orders near that level. The benchmark contract closed below the 20DMA at 7.89 euro.

Intraday ranges were shrinking day by day. After Tuesday’s 10 cents, Wednesday’s 8 cents and Thursday’s 5 cents, the EUA Dec15 moved in  a band on 2 cents in the first hour of Friday’s trading. 
The range only widened after the price fell below the support level at 7.80 euro. Daily traded volumes also reflected summer lull.

All in all, although the long term increasing trend channel remained unhurt, the short term trend goes downwards. The former local high at 7.64 euro is the first support level, followed by 7.50 euro.

After four black candles from the last week, however, we might see some correction this week. Resistance levels are at the 30 and 20DMAs at 7.77 and 7.90 euro, respectively before retesting the 8.00 euro level.

Source: Bloomberg L.P.

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