Monday, December 7, 2015

EUA Dec15 step dancing on the 50DMA

Last Monday’s doji candle showed hesitation of the market which direction to take. The 8.50 euro seemed to be a good support level with two Fibonacci levels at 8.55 and 8.50 euro, the 30DMA at 8.53 euro and the 20DMA at 8.51 euro. There were, however, some warning signals. In addition to the 30/20DMA cross and the tweezer top from the week before, the MACD fell below the signal curve and the price traded outside the short term increasing trend channel, giving another bearish sign.

The EUA Dec15 formed another doji candle on Tuesday confirming the uncertainty of market participants.

Wednesday until noon time the EUA Dec15 moved in a narrow range of 4 cents. The support at 8.50 euro proved strong again, but sellers took over the trading floor (in all markets, actually) and pushed the price to 8.47 euro, two cents below Tuesday’s low. By the end of the day the price was not able to climb back higher and closed just one cent above the daily low.

The benchmark carbon contract rebounded from Wednesday’s losses Thursday on the back of a stronger euro making burning coal more profitable for power plants. The carbon price started the day with a downward move hitting an intraday low at 8.42 euro (the 50DMA exactly) before trickling up. The bellwether contract closed the session at 8.59 euro, up 0.11 cents or more than 1% from the previous close. Thursday’s candlestick in combination with Wednesday’s candle formed a ’bullish engulfing pattern’, providing some hope for the bulls.

Despite early optimism on Friday, the price closed 0.8% below Thursday’s settlement price. The depreciation accelerated especially in the final minutes of trading leaving no doubt that the Thursday rally was a one-off that left the price in the short term declining trend channel that started 25 November.

The first support for the declining EUA Dec15 price is the 50DMA at 8.44 euro. This moving average halted the price from falling since September, but has been tested several times recently and the theory of technical analysis says, the more a level gets tested the weaker it becomes. Below this level the November low at 8.28 euro is the next support.

Should declining auction volumes support the price (this is the last week with a complete auction calendar), it has to break above 8.50 euro first to be able to retest the 2015 high at 8.71 euro. All in all, we are more bearish for this week as the chart doesn’t show any sign of a turn.

Source: Bloomberg L.P.

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