Oil May Reach $84 After Reaching Above Ichimoku Cloud: Technical Analysis
July 6 (Bloomberg) -- Thomas Schroeder, managing director at Chart Partners Group Ltd., talks with Bloomberg's Rishaad Salamat about technical analysis of the oil market. Speaking from Bangkok, Schroeder also discusses the outlook for U.S. and Asia-Pacific stocks, commodity demand and the Australian dollar. (Source: Bloomberg)
Oil may push toward $84 a barrel based on signals from on a Japanese charting method called Ichimoku Kinko Hyo, or “one-glance cloud chart,” according to Astmax Ltd.
Oil's close in New York on July 9 of $76.09 a barrel has breached the upper edge of the Kumo, or cloud, formation between $75.70 and $73.57 on a daily chart, a sign that prices will rise, said Tetsu Emori, a commodity-fund manager at Astmax in Tokyo. Prices may be limited by the top of $80.21 on the weekly Ichimoku graph.
“Moving above the cloud is a signal for the next upside move,” Emori said. “$80 is the top range. Once we get past that we don’t see any resistance so the market could move toward the $84 level.”
Ichimoku charts, invented by Japanese journalist Goichi Hosoda, are named after the most recognizable portion of the graph, the cloud that forms in the gap between the Senkou lines. These lines, also called leading spans, are derived from past price highs and lows and plotted out 26 days ahead. They act to identify the resistance and support levels.
Crude for August delivery was at $76.15 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 11:45 a.m. Singapore time. It earlier rose as much as 34 cents, or 0.5 percent, to $76.43. Futures have climbed 5.8 percent since trading at a four-week low on July 6.
Besides the prospect of prices moving above the cloud, the Ichimoku chart is showing other signs that oil might rise based on the interaction of two lines on the graph called the Kijun- sen, or base, and the Tankan-sen, or conversion.
The base line is a moving average of the past 26 days trading and the conversion is from the past nine days.
Conversion Line
The conversion line crossed over the base figure on June 11, considered a bullish sign comparable to the signal line rising above the moving average convergence/divergence indicator on a MACD chart.
A final signal for crude to rise is seen in the Chikou, or lagging span, which shows the closing price projected back 26 days into the past. At $76.09 a barrel, that line is above the June 3 closing price of $74.61.
“In total, three out of four key indicators are bullish, leading us to conclude that the Ichimoku analysis is bullish for” New York oil futures, Schork Group Inc. said a June 29 report.
For Related News and Information: For stories on technical levels: TNI OIL TA BN <GO> For implied volatility graph on crude: CL1 <CMDTY> HIVG <GO> News on oil markets: NI OILMARKET <GO>
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
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