Often the financial markets are shouting out to us long before the public is listening. Everyone remembers how annoying it was to pay $4 + per gallon for gasoline, and we all remember terms such as US Credit Rating Downgrade and the Fiscal Cliff. During these times everyone perks up their attention, however these are not the only times financial markets speak. By keeping track of the markets and knowing how to use chart patterns, we can hear the news before it becomes news. Below is a chart displaying the prices of Crude Oil and RBOB Gasoline, symbols $CL_F and $XRB_F. For those not up to speed on their Gasoline, RBOB is the Gasoline contract traded on the New York Mercantile Exchange. Let’s dig into this chart and see what it’s telling us!
We can see the all time high price for a barrel of Crude Oil was $147.27 in 2008. After its peak Crude Oil plunged along with the economy, and since 2009 has slowly been trending higher. The spikes and dips in the price of Crude Oil have left a triangle looking shape and every time price has spiked up, it failed and fell lower. Recently the price has had the strength to push up through the triangle and because of this displayed strength; Crude Oil has a high probability of continuing higher. This Symmetrical Triangle chart pattern is basically a battle between buyers and sellers building energy as the price range becomes smaller, coiling like a spring. Eventually one group will overcome the other releasing this energy, such as in this case where buyers overcame sellers.
Similar to the Crude oil chart, Gasoline peaked in 2008 at $3.41 cents per gallon. Also shown is the price drop in 2009 to less than $1.00! I know I never paid close to $1.00 for a gallon of gas in 2009, love all those taxes and profits stuck to us end users! The chart also shows how the price of gasoline has slowly trended higher since 2009 leaving a range of spikes and dips. When connecting the spikes and dips in price with trend lines we can see another triangle pattern, this triangle is named an Ascending Triangle. An Ascending Triangle is known as having highly probable odds that the price of the instrument (in this case Gasoline) will push through its upper resistance heading higher.
So combining these two charts tells us that Crude Oil has broke through its resistance heading higher, and that Gasoline is condensing its spikes and dips with a high probability of heading higher. By knowing how to use chart patterns we can hear what markets are saying BEFORE it becomes headline news. Traders can enter trades to profit from these market moves and when everyone is finally listening to what the markets are saying through the media, traders will be taking profits off the table! Also can’t hurt to budget for some potential higher gas prices!
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