ENERGY and EQUITIES

WTI CRUDE OIL and BRENT CRUDE OIL prices are developing bullish chart patterns. Year-long inverse H&S chart patterns are close to completion. Both WTI Crude and Brent Crude are challenging their necklines. For Brent Crude oil the year-long horizontal resistance stands at $52 levels. For WTI, the neckline stands at $50 levels. Breakout above the strong resistances can push prices towards $70 levels in the following months. $70 is the possible H&S bottom price target.

WTI CRUDE OIL weekly scale price chart

BRENT CRUDE OIL weekly scale price chart

Similar bullish technical outlook can be identified on several equities in the energy sector and energy related exchange traded funds. Below are some of the equities from Tech Charts watchlist. Note: According to Edwards & Magee a breakout is confirmed when a stock records a daily close above the resistance by 3% margin. Levels on the charts below take this guideline into consideration.

OMV AG an Austria based integrated oil and gas company forms a year-long symmetrical triangle. Stock has been challenging the upper boundary of its consolidation. Breakout above 26.5 levels should generate fresh chart pattern breakout signal.

CHINA OIL & GAS Group limited is a Hong Kong based investment holding company principally engaged in natural gas and energy-related businesses. A decisive close above 0.65 will confirm breakout from year-long H&S chart pattern.

PREMIER OIL is an independent exploration and production company with oil and gas interests in the North Sea, South East Asia, Pakistan, the Falkland Islands and Latin America. The company is engaged in the business of upstream oil and gas exploration and production. Since the beginning of May 2016 the stock has been forming a rectangle (continuation) chart pattern with the boundaries between 59.75 and 80.35. A decisive close above 82.40 will confirm breakout from the 6 month-long rectangle chart pattern.

CANYON SERVICES GROUP provides stimulation and fluid management services to oil and gas exploration and production companies operating in the Western Canadian Sedimentary Basin. The company’s segments include Pressure Pumping Services and Fluid Management Services. Price chart of the, Toronto Stock Exchange listed Canyon Services has a text-book H&S bottom chart pattern. Year-long base formation has a horizontal resistance (neckline) at 5.87 levels. A decisive close above 6.05 will confirm breakout from the year-long H&S bottom.

HALLIBURTON COMPANY is a provider of services and products to the upstream oil and natural gas industry. Price chart of the U.S. energy stock formed an inverted triangle with the horizontal boundary standing at 46.85 levels. Over the past 4 months, the resistance was tested 3 times. Breakout above 48.30 levels will complete the multi month consolidation.

LAREDO PETROLEUM is an independent energy company focused on the acquisition, exploration and development of oil and natural gas properties, and the transportation of oil and natural gas from such properties primarily in the Permian Basin in West Texas. Price chart of Laredo Petroleum is forming a year-long H&S bottom with the neckline standing at 13.70 levels. A decisive close above 14.15 levels will confirm breakout from the bullish base formation.

HELIX ENERGY is an international offshore energy services company. The company provides services to the offshore energy industry with a focus on well intervention and robotics operations. Price chart of HELIX ENERGY formed a 5 month-long symmetrical triangle. Breakout is underway with the strong weekly close of last week’s price action.

GEOSPACE TECHNOLOGIES CORP designs and manufactures instruments and equipment used in the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. GEOSPACE TECHNOLOGIES formed a year-long H&S bottom with the neckline standing at 19 levels. A decisive close above 20 levels will confirm breakout from the multi-month bullish chart pattern.

ISHARE GLOBAL ENERGY ETF is an exchange traded fund listed in the NYSE. The price chart of the energy ETF has a similar year-long H&S bottom with the neckline standing at 33.15 levels. A decisive close above 34.10 will confirm breakout from the multi-month base formation. The right shoulder of the H&S bottom can be identified as a rectangle with the boundaries standing at 30.50 and 33.15.

BASIC MATERIALS and ENERGY

In the first few months of 2016, strong performance in Gold and Silver resulted in a sharp rally in precious metal stocks. Several oversold gold and silver mining companies had strong performance over the past few months. Similar bullish theme can take place in the basic materials and energy complex. Some of the commodities in the industrial metals and energy group are in the process of forming major long-term bottoms. The same bullish chart set ups can also be seen in the equities of basic materials and energy companies.

WTI LIGHT CRUDE is possibly forming a H&S bottom with the neckline standing at $50 levels. This chart is still at the early stages of a H&S formation. A few more weeks of strength will complete the right shoulder of a year-long base formation.

Formerly known as Dow Jones-UBS Industrial Metals Subindex Total Return (DJUBINTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of longer-dated futures contract s on aluminum, copper, nickel and zinc. It reflects the return on fully collateralized futures positions and is quoted in USD. This chart has possibly completed a H&S bottom and currently consolidating above the neckline.

Formerly known as Dow Jones-UBS Aluminum Subindex Total Return (DJUBALTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Aluminum. It reflects the return of underlying commodity futures price movements only and is quoted in USD. The neckline of the year-long base formation stands at 28.20 levels.

NMDC Limited is an India-based company engaged in the mining of iron ore. The Company’s business segments include Iron Ore and Other minerals & services. The Company is also engaged in the exploration of various minerals, including copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands. A perfect horizontal resistance (neckline) stands at 105 levels. Breakout above this level will complete a year-long base formation.

Freeport-McMoRan Inc. (FCX) is a natural resource company with a portfolio of mineral assets, and oil and natural gas resources. The Company’s segments include the Morenci, Cerro Verde, Grasberg and Tenke Fungurume copper mines, the Rod & Refining operations and the U.S. Oil & Gas Operations. It has organized its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. This is another perfect example of a year-long H&S bottom with the neckline standing at 14.20 levels. Breakout above 14.20 will be bullish and possibly target 25 levels.

Technip SA (Technip) is engaged in project management, engineering and construction for the energy sector. The Company operates through two segments: Subsea, Onshore/Offshore and Corporate. This stock is listed in France. Over the past year, 53 levels acted as strong resistance. Stock might be completing a year-long base.

Wacker Chemie AG is a Germany-based company engaged in chemical industry. The Company operates through four business segments: WACKER SILICONES, which produces silicone products, ranging from silanes through silicone fluids, emulsions, elastomers, sealants and resins to pyrogenic silicas; WACKER POLYMERS, which offers a range of polymeric binders and additives; WACKER POLYSILICON, which provides polysilicon, and WACKER BIOSOLUTIONS, which is the life science division of the Company, offers solutions and products for the food, pharmaceutical and agrochemical industries. While this base formation does not have the perfect symmetry between the left and right shoulders, it is clear from the chart that the horizontal resistance at 86 levels will be critical in the coming weeks. Breakout above 86 will be bullish.

 

SILVER and SOYBEANS

Poor man’s gold might be setting up for a strong performance in the metal complex. SILVER/GOLD ratio is reversing from a historical support area. This level acted as a medium/long-term turning point for the ratio in 1997, 2003 and in 2008. Not only the relative performance of Silver is showing strength but also the price chart of Silver forming a possible base formation. Silver has been outperforming another precious metal that has industrial use; platinum. SILVER/PLATINUM ratio is on the rise with the latest chart development suggestion even more to come. In the metals, silver can be a winner.

SILVER VS GOLD WEEKLY SCALE RATIO

SILVER VS PLATINUM WEEKLY SCALE RATIO

Over the past year, Silver possibly formed a head and shoulder base with a neckline at 16.35 levels. Breakout above 16.35 will clear multi-year downward trend lines and also the year-long horizontal resistance. Weekly price closed at 16.21 levels.

Another long-term opportunity might be developing on Soybeans price chart. Over the past few weeks, Soybeans reversed from an important inflection point. Two long-term trend lines overlapped around 850 levels. Last week’s strong weekly price bar suggests possible strength for the following weeks. Resistance area on the first month continuation chart is around 1070.

WEEKLY SCALE PRICE CHART

NATURAL GAS and COCOA

Long-term price chart of Natural Gas suggests that the volatile commodity is now trying to recover from historical strong support area. Over the past two decades Natural Gas (Henry Hub) prices traded as low as 1.62. There has been several instances when price reversed sharply from the strong support area between 1.62 and 1.76.

Natural Gas might be forming a base formation above strong support area. Possible head and shoulder bottom might be completing with the right shoulder now testing the left shoulder price level and forming symmetry. It is important to note that a breakout above 2.5 levels will confirm the H&S base formation and suggest higher levels in the following months.

Head and shoulder bottom and top chart patterns usually form after prolonged down/up trends. Natural gas has been in a consistent downtrend since the beginning of 2014. A similar reversal took place in 2012 after the energy price fell from 5 levels to 1.9 in less than a year. Below chart shows the base formation (head and shoulder bottom) in the first half of 2012.

Cocoa is another commodity that could enjoy higher prices in the following weeks/months if strong trend channel and horizontal support holds. Last one year’s consolidation has been between 2700 and 3400 levels. Price is now back to 2700 levels. While long-term trend is upwards, intermediate-term trend is still sideways. Though, Cocoa can present a low risk/reward entry around the strong support level.

WTI CRUDE OIL

Oil prices are rebounding but strong resistance area remains between $32 and $40. In 2009, when oil price dipped below $40 support area, it took two months to recover back above critical level and there hasn’t been a single month of close below $40. Latest breakdown below $40 has been decisive and unless we see a rally above $40 in the last trading day of the month, this will be the second monthly close below $40.

It is highly likely that the new equilibrium will form between $10 and $40. Recovery above $40 can take longer. Possibly there  will be a lengthy consolidation and the upper boundary of that consolidation remains at $40.

Both charts are plotted on monthly scale. Each bar represents one month of price action.