Energy Prices To Find Support

Posted by barkand on March 15, 2011 under Commodities, Point and figure charts, Price trends | Be the First to Comment

Well after a short holiday, we’re back looking at energy prices.

With the developing nuclear catastrophe in Japan, every market everywhere is getting whacked. Or about to get whacked, as the US market opens in a little more than an hour from now. Even energy prices and shares of energy-related companies are getting hit.

Below is a chart of the Dow Jones US Oil + Gas Index. We have applied a 3% filter to the data, so in a sense, it is analagous to a 1×3 point-and-figure chart except this chart retains a time element.

The index has gone up almost in a straight line since last August. It only recently gave some ground along with most other markets, and will retreat more later today. The ADX indicator is also dropping from over 40, suggesting the end of the current trend.

How low can it go? After such a strong advance, the 20-period moving average often provides solid support. In this case, the 20-week MA is quickly approaching 600. That level would also represent a 50% retracement toward the three peaks registered in late 2009 and early 2010. After perhaps a brief rest, we expect energy prices and energy stocks to continue advancing.