by Cynthia Kase
Read on TraderPlanet
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With VW cheating on diesel fuel emissions and standards being scrutinized worldwide, interest in electric vehicles may increase longer-term, and medium-term, gasoline fueled vehicles might pick up. But will gasoline prices get a boost any time soon? Probably not.
December gasoline, which becomes prompt in two days, traded up to $1.4604 at the end of August. Since then it’s been caught in a downward oscillating pattern, but remains above its earlier $1.1756 low.
Odds favor the downside. This was a large down month which prevented a bullish reversal pattern from completing. On the daily chart, the decline to and bounce up from $1.1756 was a bullish V-bottom but failed. The decline from $1.4604 was interrupted by a bullish flag which has since broken lower. The perpetual has been steadily dropping since mid-June, only going into a sideways stall during the past two weeks.
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Odds of a recovery are higher than for a normal trending market. The decline from $1.4604 only met the minimum 0.62 extension. The decline has also been shallow.
Two very strong layers of support are $1.235 and $1.205, respectively the 78 percent and 89 percent retracements of the $1.1756 to $1.4604 rise. $1.235, less than one cent above the perpetual’s January low, is important because it’s only generated by the waves down from $1.4604. For the six waves down from this price, $1.235 is a wave extension for five, and as a corrective projection for three. Thus, should $1.235 hold, there is no connection to larger, earlier waves which project to lower levels. The next layer at $120.5 connects back to the mid July $1.5828 high. This support level could engender a trading range between the $1.20s and $1.50s, so watch out for that.
Even though the previous low of $1.1756 is natural support, a close below $1.205 could trigger a steep decline down to $1.06. This is because the wave extensions tie the two prices together. The wave 158.28 – 117.56 – 146.04 targets $1.205 as the 0.62 extension and $1.06 as the equal, 1.0, extension. 140.46 – 130.04 – 133.73 targets $1.205 as the 1.38 extension and $1.06 as the 2*1.38 extension. The point is that should there be a close below $1.205, the pull from $1.06 grows.
Adding to that pull is that $1.06 is the 89 percent retracement of the move up from the 2008 low of $0.785 to 3.48. Hitting $1.06 could cause a slide below the $1.00 level.
So watch to see if the two targets in the $1.20s hold – or not.
A close over $1.375 would argue for concern that the move up from $1.1756 will extend. That’s the price above which I wouldn’t hold short-term short position. Above $1.4604 the contract is in for a further recovery. Either way, moderate prices, well below prices should prevail. So fill up the tank, and get on the road before December snows slow you down!
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