The Chart du Jour

5th Wave Finale: Unleaded Gas

May 24, 2001

By, Barclay T. Leib


Chart produced using Advanced GET End-of-Day

One of the big movers in the early part of this week has been Unleaded Gasoline. It's almost as if as Memorial Day approaches, the market is getting itself all revved up for a long hot summer.

Without a predisposition to this market, nor any solid fundamental research on it, we got out our trendline pen, and Fibonacci bands and tried to do a bit of simple technical analysis on this chart. After much thought, what we can offer is as follows:

1. Rather than a further explosion higher, we are clearly in a 5th. wave pattern basis the weekly chart -- closer to ending a move than beginning a major new one.

2. On a continuous contract weekly chart basis, Fibonacci bands suggest an extrapolated front-month high of around 120.45....not that far away from today's closing June price of 115.89, but still some distance from today's July contract's close of 100.97.

3. Basis the July contract, 105-107.50 represents a similarly compelling Fibonacci target zone.

Hence, we think the likely bottom line for this market is that 120.45 will be reached by the expiry of the June unleaded gas contract just seven trading days from now on May 31, with July trading up into its target zone as well, but without further follow-through thereafter.

Instead, and with time, an a-b-c corrective move should eventually bring this market back down to trendline support near 91 cents.

Let this read: The energy crisis of the summer currently is sporting a bigger bark than will be its actual bite. Or, alternatively stated, the U.S. economy is about to cool precipitously making $1.20 wholesale gas prices unsustainable for very long.


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