Energy Forecast: Oily With a Chance of Gas

• Posted by Greg Harmon
• on June 9th, 2011

A quick look at the energy space shows some interesting trends emerging among four major sources of energy, Oil, Natural Gas, Coal and Solar. Oil continues to be a strong investor preference but there is a shift from Coal to Natural Gas Developing. It also seems that investors are catching on to the cost issues in Solar power. Let me illustrate with some charts.

United States Brent Oil Fund, ticker $BNO

The United States Brent Oil Fund, BNO, had a strong rise from September through to its peak in April. After falling lower and consolidating is started to look good again last week (it was a top ten pick Sunday – link below). Wednesday it broke out above the 50 day Simple moving Average (SMA) and is now pressing higher. It has resistance at the gap fill at 80.25 and then a target of the previous high of 84.11. With a rising Relative Strength Index (RSI) and increasing Moving Average Convergence Divergence (MACD) indicator supporting more upside it looks likely to test that high. Oil has been a clear investment preference and continues to be so.

United States Natural Gas Fund, ticker $UNG

Market Vectors – Coal ETF, ticker $KOL

The charts of the United States Natural Gas Fund, UNG, and Market Vectors – Coal ETF, KOL, are the most interesting. They have been mirror images of each other since September. KOL has been rising and then consolidating higher, looking like it could be a rounding top if it breaks support at 45.35, while UNG was falling and is now trying to emerge out of a rounding bottom. This is a clear shift of investor preference from Coal power to Natural Gas. If this continues look for KOL to eventually break 45.35 and then look for support at the 200 day SMA and then the gap at 43.56. For UNG a break above the rising trend resistance will look for resistance at 13 and then 13.55. These break outs do not look imminent with UNG putting in a big reversal Thursday along with its falling RSI and waning MACD, and KOL holding a higher low with a rising RSI and improving MACD. But note that the RSI for KOL remains in the bearish sector of the chart while that for UNG is in the bullish territory.

Guggenheim Solar ETF, ticker $TAN

Finally the Guggenheim Solar ETF, TAN, needs a longer view to see the full story. A major discount to the Solar power industry took place during the financial crisis and it has not recovered. Looking more recently shows that the SMA’s that had been relatively flat until recently are starting to roll lower as the price is losing support at 6.82. The RSI and MACD are both supporting more downside as it breaks through. Support can be found lower at 6.41 and then 6.00 before a major fall to the March 2009 lows. Clearly not a favorite with investors now.

Top Trade Ideas for the Week of June 6, 2011: The First 5

I am long BNO as of the writing of this article

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