FuturesTechs Blog

As per our previous post, where we looked at how we’d done over the year in the Bund, here is a similar excercise for Brent Crude:

Brent has been through a volatile period this year and proved difficult for many investors and fund managers to trade successfully. At FuturesTechs we’ve called things pretty well, capitalising on the move up at the start of the year as the Libyan situation escalated, and subsequently calling the move down. Sideways trade since has proved a challenge, but our trend following mantra and reliance on Candlestick patterns as well traditional reversal signals has ensured a vast percentage of the moves have been captured. The chart and captions below review our commentary and thoughts at some of the major turning points throughout the year.

A: Maintained a Bullish SkewBar throughout the start of the year until a neutral stance during a period of consolidation late January.

B: Highlighted the upside breakout as Bullish and called for a move to 104.98.

C: Maintained a Bullish stance during this pullback as a ‘Buy the Dip’ scenario

D: ‘‘Only a big reversal pattern on the daily chart would see me thinking of anything other than bullish thoughts’’ 24.02.2011

E: ‘Shooting Star no confirmation’ – Still Bullish.

F: ‘‘Bearish Engulfing Pattern. For the first time in a while I might just disagree with an outright bull trend following approach.’’

G: ‘‘Are we breaking this consolidation phase to the upside? YES WE ARE!’’

H: ‘‘Don’t buy Brent Crude today’’ Rule of 9.

I: ‘A drop through 119.03 will give us a Double Top sell signal’ 05.05.2011.

J: ‘We would expect 113.50 to continue to hold and for 115.48-62 to give way some time soon to give the bulls encouragement to head to higher levels. ‘

K: ‘’Our Bull Skew got smashed to pieces yesterday. All change.’’

L: ‘‘The Hammer candle indicates the potential for a change of trend so about the previous days Marabuzo line at 107.13 we’ll back the bulls expecting a move to 110.90-111.73.’’

M: ‘’The failure to sustain new highs for the move followed by a significant sell off suggests the bears have the upper hand. A sustained break below 114.66-78 see’s our Skew firmly back the bears. ‘’ 02.08.2011

N: ‘…a Hammer candle indicating the rejection of the new low. This is a potential change of trend signal and on a move through Marabuzo and Fib resistance at 106.14 and 107.01 respectively our Skew backs the bulls for a move up to 110.58 and 112.13.’

O: Our SkewBar struggled whilst Brent chopped around, then we said ‘This pullback has left a potential Right Shoulder of a Head and Shoulders Top formation on a shorter timeframe chart’ 19.09.2011.
‘Our Skew is in neutral territory requiring the bears to break 108.07 before backing them.’ 20.09.2011

P: ‘’Our chart has taken a step back  today and put the recent price action within the confines of a broad down trend channel, which we have also labelled a-b-c.  This is an Elliott Wave annotation which we’ve added as it’s possible that this recent move lower is the bottom of a counter trend Wave 4. If this is the case, much higher prices are on the horizon.’’ 06.09.2011

Q: ‘’Friday resulted in the 9th Green candle in a row. The ‘Rule of 9’ suggests that this rally will not post more than 9 green candles. So today we expect to post a red candle’’

R: ‘Buying dips was our favoured outlook, but given yesterdays Engulfing candle and a 3 day Evening Star formation  our Skew is going to tighten to the broken trend resistance at 111.45. below here our Skew turns bearish acknowledging the reversal candles.’’

S: ‘A trend line across the recent lows provides the Neckline of the potential Head and Shoulders Top and provides support at 105.93 today. Our Skew is in bearish territory below 113.53 down trend resistance.’

T: ‘’This morning the Neckline of the Head and Shoulders is being retested and presents a selling opportunity at 105.77. The 61.8% retracement at 102.45 is the next target for the bears. The Head and Shoulders target is 95.42’’

Here at Futures Techs we cover, on a daily basis, Brent Crude Oil, GasOil, NYMEX WTI (AKA Light Sweet Crude), Natural Gas and Carbon Emissions. Below is today’s comment and levels for Brent Crude, where we’ve seen a good move in recent sessions.

A bullish breakout on Wednesday was backed up beautifully by another strong session yesterday as we traded up from 80.41 to 82.40. In overnight trade we’ve extended these gains and have printed 83.01 as we write, getting above the next big resistance, the 82.94 high seen on August 4th.

So it’s all going rather well for the bulls and we’re now looking up to see where this can go next. The next big resistance dates back to early May and is the high/failure back then; 89.58.

That’s right. The next big resistance is 7 bucks away.  83.75 and 87.00 might try and have a say in the meantime.

Chart Levels

__________

R7  - 86.98

R6  - 86.28

R5  - 85.95

R4  - 85.00

R3  - 84.18

R2  - 83.75

R1  - 83.25

_____________

S1  - 82.94

S2  - 82.40

S3  - 82.11

S4  - 81.45

S5  - 81.13

S6  - 80.41

S7 -  80.00

We are watching these markets very carefully right now as there is a confluence of events that suggest things may be changing. We don;t often start talking the funny-mentals, and we don’t often worry about relationships between markets, however close they may be. But I’m going to make an exception in this instance.

Price action in Oil is probably tantamount to the whole thing. Western economies are on the brink of recession, triggered by the Credit Crunch, but exacerbated by the soaring price of Oil. The Central Banks are meant to raise rates in response to rising inflation, but the current rise in inflation is nothing to do with people over-spending. Far from it. If Central Banks raise rates on this basis it will be disastrous.

We need Food and Energy prices to come down to take the inflationary pressure off.

So now we turn to our charts:

Just looking at the contracts we cover here at FuturesTechs we see the following:

Corn is well off it’s highs. We topped out at 799.2 in June. As I write this we’re trading 625. Pressure off.

Wheat’s all time high was set back in February. The recent high/failure was bang on a Fibonacci retracement level. So that’s going down as well.

Soybeans only topped out in early July and so far haven’t taken out any really big supports on the way back down, although price action in recent days has totally favoured the Bears.

Brent Crude Oil has dropped from a high of $147.50 on July 11th to 129.66 on Friday. We have posted a “Three Black Crows” Candlestick reversal pattern; a significant reversal. That was last Tuesday, Wednesday and Thursday (15th, 16th, 17th July). On Friday (18th July) and so far today (21st July) price action has favoured the Bears (Dolly could spoil the party, though).

So Ags are well off their highs and Oil has had a reaction lower that’s like nothing we’ve ever seen before. At the same time Bond prices are selling off hard (the “flight to quality” trade unwinding) and Equities are staging a recovery.

Most are calling this a “Dead Cat Bounce” (a rally in a Bear market that doesn’t last long!), but when you factor in everything else we’ve just highlighted you start to at least ponder this: Is the worst of the bad news over? Are we “all done” with this sell-off? One thing that favours this is the negativity of the popular press. You know things are about to turn when you can’t find a single bit of good news in the press, and I put the business pages down yesterday morning because it was putting me off my breakfast!!

We posted a large red candle yesterday in ICE Brent Crude Oil and if you combine the 9th and 12th May on the Daily Candlestick Chart you get a Bearish Engulfing Pattern. Does this means we’ve seen a top? Hang on a second! The phrase “One swallow doesn’t make a summer” springs to mind!

If anything a bit of a pullback in Brent Crude and NYMEX Crude wouldn’t do any harm to the Bulls, as it’s not healthy to go up in a straight line. The buyers are bossing things right now and we don’t think any pullbacks will last long (4 days of weakness at the end of April were taken back in just 2 sessions).

On the other hand Equity markets look like they’re struggling, and the old adage of “Sell in May and go away” is being rolled out left right and centre.

The “full version” of this phrase is “Sell in May, Go away, come back on St. Leger’s Day”. St. Legers day is a horse racing festival in September, by the way! (It’s held in Doncaster, a place that will be feeling rather down in the dumps come September because they’ll still be playing League 1 football after Southend United beat them in the Play-offs this Friday).

I digress! Back to Equity markets: The Eurostoxx 50 Future is one of our favourite benchmarks. It’s a great contract to trade, with lots of volume, decent enough volatility, and no horrible periods of illiquid trade. We have broken trend support in this one today (13th May) and if we close below 3760 we’ll look for further weakness going forward. 3674 is our first target to the downside. Once we get through here 3545-75 is the next area of support to target.

We are planning to try out adding a few Individual Equity recommendations to the members area of our website, including daily technical analysis on Vodafone (far and away the most actively traded stock in the UK) and a “pick of the day” from elsewhere in the FTSE 100.