For traders still looking for an entry point to buy the recent strength in the energy complex, Monday's set-up in the NYMEX heating oil futures may fit the bill. Heating oil closely follows the price of diesel and other fuel distillates, causing it to move in sympathy with both gasoline and crude oil prices. Autochartist identified Monday's swing low in heating oil as a retest of support on the chart and suggests a potential turn higher for the week ahead.
The market has been chopping out a groove between $3.20 and $3.30 per gallon as it awaits longer term direction from the broader crude oil complex. Chart analysis reveals this as the beginning of a relatively shallow ascending triangle chart pattern, with Monday's low coinciding with support provided by the underside of the triangle right at the $3.20 per gallon price level. The subsequent bounce poises the price for a return to the resistance trend line that forms the top of the pattern which currently rests near the $3.32 per gallon level. If this pattern holds, the swing low now underway makes for an appealing spot to enter long positions. Stop-loss orders would be placed below the technical breakout level, somewhere beneath the trend line support at $3.20 per gallon. A successful rally to the top of the ascending triangle would amount to a 12-cent per gallon move, with the potential upside breakout from that level a distinct possibility given the bullishness of the energy markets. Autochartist will project an upside forecast well into new high territory if an upside breakout from the pattern does materialize.
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