There’s no doubt that Oil and energy related assets have been a great place to be these past few months, but a lot of the names I follow are hitting my upside price targets left and right. I do believe current price action suggests they may have one leg higher left in them, but I think further upside may be limited as many of these securities approach their downward sloping 200 day moving averages.
I’ll admit, it’s hard to tell if this was the ultimate bottom in energy related assets or if it’s a correction within a structural downtrend, so I may end up looking like a total doofus with this post. That being said, I do tend to lean towards the latter because it will take weeks/months of price consolidation to allow the moving averages on a daily and weekly timeframe to flatten out and begin curling higher. Until we see that happen I think it will be tough to sustain any rallies over the intermediate or long term. Also, despite the recent relative outperformance, I think the weekly charts have a lot of work to do in correcting the structural weakness we’ve seen on an absolute and relative basis for the past few years.
That being said, I think natural gas is setting up nicely on the long side, in similar fashion to what we saw in other parts of the energy market months ago.
First, let’s take a look at the charts Crude and its related markets and outline the what I see as remaining upside targets if prices continue to act constructively.
2. Momentum has yet to hit overbought conditions.
3. Next targets up toward 63, 66, 71 if we continue to stair-step higher.