Heating oil futures have formed a very well-defined Rising Wedge chart pattern during the latest run-up in prices. This pattern scores high in all categories, with a 10-bar initial trend reading and an overall quality of 10 bars. So far the market has responded once again to a retest of resistance by falling back towards the inside of the wedge, suggesting a retracement may be under way.
Resistance provided by the wedge capped the latest gains at just below $3.10 per gallon, where the price stalled and began drifting away from the trend line. Technical short selling and profit taking may ensue from this level to drive the price back to the support provided by the rising trend line near $2.97 a gallon.
Heating oil is a distillate product and tends to follow the crude oil market fairly closely. Therefore an unexpected spike in crude oil would likely carry heating oil higher with it. From the current level, a move above $3.13 per gallon would be viewed as a top side breakout from the wedge chart pattern. If this does transpire in tandem with a move in the broader complex, it would reverse the short term bearish trajectory in favor of the longer term bull market that is now well established.
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