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Trading Carbon Emissions Allowances - The EUA Contract

Commodities / Climate Change Jul 23, 2009 - 05:57 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleThis week in the Commodity Trading Guide we commenced regular coverage of EUA – (Carbon) Emissions Allowances. Interest and, accordingly, volume is growing strongly in this market, and the charts lend themselves well to technical analysis. In this Update we reproduce our analysis from the Guide.


The Commodity Trader’s view


MONTHLY CHART – CONTINUATION:
The interesting points to note here are:

  1. This long term chart has channelled very well – the base projection was briefly eroded in early 2009
  2.  If we’d been charting this much sooner we would have calculated a 8.52 equality target (33.05-12.22 downmove extended off 29.35 high)
  3.  For non-technical reasons there is currently a floor around 8.00

All the above combined to support the market - we now assume that a medium/long term recovery phase is underway.

 

WEEKLY CHART – CONTINUATION:

For clarity, the candlestick chart here reveals, bar a few ticks, a bearish Key Reversal Week in Jul-08, marking the start of the major leg down.

More recently there was another one in May, marking the start of the latest pullback phase.

Resistance from 15.85/16.22 is clear (May high and 38.2%).

- a break higher would bring into focus prior 18.25/18.80 lows and the 18.73 50% level, where we would expect further resistance to emerge.

Note how the start of the final downleg segment in late 2008 coincides with the 38.2% retracement – underlying Fibo forces at work?....Of course!

DAILY CHART – Dec-09::

Recently the market had stuck at the 38.2% pullback.

A s/term bull signal came from the break from the small bear channel top projection.

Last week saw resistance around the small 61.8% level; the next test for the bulls would be the small 76.4% level just above 15.00 – resistance soon would not surprise.

We don’t know yet if there is another downleg to come, that breaks below the 12.42 Jun low.

13.70 26-Jun high offers first support, but of more interest is the rising support line at 13.35 currently, ahead of that 38.2% area around 12.90.

A good close below the latter would show that another downleg was underway. Meanwhile we await better clarity in the s/term chart structure - we have adopted a sidelined stance for now. Interested readers are invited to track the progress of this market for a month, free of charge via our trial subscription offers. This would also qualify for a year’s free Updates too. Finally, note also the correlation between EUA and Crude Oil.

Philip Allwright
Mark Sturdy

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2009 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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