Did A Technical Pattern Just Save You Money At The Gas Pump?
- Posted by TheArmoTrader
- on April 17th, 2012
Did a technical pattern just save you money at the gas pump? It might sound silly at first, because we all know gas prices for the most part are determined by supply & demand, however, you do need to take note of possible technical patterns that might come into play.
Unleaded Gasoline ($RB_F, $UGA) has had a nice run since December, however, if you had been paying attention to the weekly chart, you would have noticed that it ran up right to resistance from last year. It just couldnt get above that. Call it demand destruction, call it Obama talking down oil, but as a trader, I see that as previous resistance acting as resistance!
Below is the weekly chart of RBOB unleaded gasoline ($RB_F). As you see, after setting up a nice base in 2011 above the important 2.50 level, RBOB gasoline saw a a nice run starting in December. It then hit a wall of resistance at 3.40 and has since broken the uptrend line and is now selling off. Since the setups are very identical, will we see a similar sell-off like last year where we almost saw a dollar drop in $RB_F?
It’s hard to say and many will probably be doubtful especially with all the geopolitical risk. However, we had similar conditions last year and nobody was expecting the price of oil to fall over by over a 1/3rd (except for one guy). Also, it is interesting to note that the front-month contracts are trading at a discount despite the fact that the height of driving season is yet to come.
However, unlike last year, I am more neutral on oil (and gas) for a couple of reasons.While there is a possibility for more weakening demand from Europe and China, the possibility of supply shortages should build premiums in the price of oil that might put a floor to the downside. Bespoke Investment Group also had a nice article out today talking about the possibility of some relief at the pump as well.
$RB_F - Gasoline Futures
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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