Monday's sharp pullback in Heating Oil futures set a bearish tone for the week ahead. After a prolonged rally into new monthly highs, Autochartist has signaled a breakout with the potential for a significant correction in the near term.
Heating Oil futures have been trading inside of a Rising Wedge chart pattern since the swing low occurred near $2.70 per gallon at the beginning of October. A steady climb to above $3.10 completed the pattern, which is illustrated here on the 240-minute timeframe. The pattern is now very mature, measuring 116 bars in length with a high overall Quality ranking of 8 bars.
The breakout signal was generated when the price fell below the wedge support near $3.05 per gallon. The sell-off occurred on light momentum and may retrace higher to retest the underside of the wedge before continuing towards the forecast price level.
Lower trade in Tuesday's session should confirm the breakout. If this occurs, the projected price calls for a minimum target of $2.89 per gallon to complete the breakout. Acceleration of the downtrend may result in a move to the lower ed of the forecast near $2.66 per gallon.
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