DAY HAGAN TECH TALK MAY 29, 2018
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Crude Oil ($WTIC/$67.88 based on the continuous contract) declined almost 5 percent last week. The weakness in $WTIC was mainly due to reports that Russia and Saudi Arabia are increasing production. Initial support for $WTIC Crude exists in and around $66-$65 followed by a pocket of support between $62 and $58. With the start of the summer driving season, I want to also discuss the bullish chart configuration of Unleaded Gasoline ($GASO/$2.17 – continuous contract) and potential support levels, as shown below.
Given the uptrend, what important support levels need to be held? In light of the weakness in the price of $WTIC last week, $GASO declined almost 2.5 percent last week. A previous price low (support) exists at $2.05. If this level is decisively violated, various trendlines and another previous price low offer support in the area between approximately $1.95 and $1.90.
When I drove around Maine, North Carolina, and Virginia last week, I paid the following prices per gallon for Gasoline (retail price at the pump): $2.99, $2.88 and $2.66 respectively. According to my good friend and former colleague Dr. Scott Brown, the Chief Economist at Raymond James Financial, “$0.70 is the approximate spread between the retail gasoline price (what you and I pay at the pump) and the futures price (the price shown in the previous chart).” What does this mean for your bottom line? By adding $0.70 to the support levels listed above, and depending on where you purchase, you may see Gasoline prices at the pump between $2.75 and $2.60, and possibly $2.53.
As shown below, on a year-to-date basis, $GASO, $WTIC, Bloomberg Commodity Index, S&P 500, and Gold have performed as follows (rounded figures): +21 percent, +12 percent, +3 percent, +1.8 percent, and -0.45 percent. Given Gasoline’s strong uptrend, we would expect periodic retracements. Now we’re watching to see if the support levels hold.
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Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management
—Written on 05.28.2018. Chart sources: Stockcharts.com.
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