John Lansing's Trending123
John Lansing's Trending123
Username: Password: Login
Trade Talk E-Letter Products & Services Trading Tools Portfolios Members Home
risk-free trial

stock market trading chart pattern research
Saturday, March 4, 2006
Sunday, March 4th 2007

Weekend Update - Unleaded Gasoline and it's Influence on the Broader Market

This update will cover the recent action in Unleaded Gasoline and how it has influenced the broader market. I will also discuss how unleaded gasoline has affected some Momentum stocks. Unleaded gasoline has made a stealth move upwards off it's lows since the beginning of the year. I find it intriguing that the market pundits have unwittingly failed to broadcast this move. The deafening silence from the media regarding Gasoline makes me conclude that there is a strong correlation between the broader market top and Gasoline's bottom and stealth move upwards. Gasoline has risen 43% alone this year and is currently at resistance. That is very bullish for Gasoline long term. This move by Gasoline illustrates that it is indeed connected to the broader market. However, and I cannot stress this enough, Unleaded Gasoline is very overbought right now and the broader market and momentum stocks are very oversold right now. Therefore, I believe that the broader market is ready for a bounce off of the lows this week and that Gasoline is ready for a pullback off this year's highs.

Unleaded Gasoline - Continuous Contract Nymex Index - $GASO - Daily Chart - Bullish Broadening Megaphone Bottom Pattern The daily chart of Unleaded Gasoline illustrates that it is in a Broadening Megaphone bottoming type pattern. In August of last year, $GASO had a precipitous drop all the way down $1.45. This marks the primary low for $GASO at the corrective A wave. At this time you can see that the RSI, the Aroon, the WM%, PPO and Stochastics are all in bearish and oversold territory. This is followed by a dead cat bounce off the lows to place the corrective B wave at $1.57. This high is in turn is followed by lateral move down to the corrective wave C at 1.41. Now turn your attention to the indicators and oscillators at this time. You can see that they are now in a bullish trend reversal and showing positive divergence. $GASO rallies up to $1.72 and gains 23% in 7 weeks and this marks the corrective wave D move. $GASO them promptly reverses again, and experiences another precipitous drop all the way down to the corrective wave E where it places it's final low at $1.34. Now turn your attention again to the indicators and oscillators at E, and you will see that they are showing bullish positive divergence off of the lows from wave A. The positive divergence appearing at this point confirms that the lows are indeed in for $GASO. What does $GASO do then? It promptly reverses and rallies 43% in 6 weeks all the way up to heavy resistance at $1.94 which also happens to be the top of the Triangle. You can see that all the EMA's crossed and the indicators and oscillators went bullish and followed the move up in price. Now $GASO is extremely overbought is ready for a pullback and the broader market is ready for a bounce. The most significant aspect of this chart is the bullish divergence that is presenting itself in the price, the PPO and RSI and the correlation to the moves in the $INDU since November. Please look at the $INDU chart from this weekend's update. Also refer to the weekly $GASO chart below.

Unleaded Gasoline - Continuous Contract Nymex Index - $GASO - Weekly Chart - Bullish Broadening Megaphone Bottom Pattern The Weekly chart of Unleaded Gasoline illustrates that it has spent over a year consolidating in an ABC move down to put in a double bottom in a corrective wave 3 to wave 4 pullback off the highs. In addition, you can see that after the latest lows were placed at $1.34, the exponential moving averages have bottomed are attempting to turn upwards, and hint a future triple EMA cross. Also note that the Aroon indicator just had a bullish cross which also portends a bullish continuation trend. However, as I have said before, whenever the Aroon has a bullish cross on the weekly it means that the daily is overbought and ready for a pullback. Expect a pullback now. Most likely to the 34 EMA on the weekly, which as a magnet for price to retreat to on dips. Also note that $GASO has gone up over 7.87% in the first two days of March alone. That is a huge rise in 2 trading days! Also note that it has stalled at $1.95 which is resistance. Expect a bounce in the broader market now.

Now I want you to turn your attention to $GASO at the Beginning of 2006. Notice how $GASO drops precipitously from highs in January '06 at $1.89 down through February to the lows at $1.42. This marks A in the ABC corrective lettered move down in impulse wave 3 to wave 4. $GASO then reverses at A and rallies expeditiously up to $2.23 in April 2006. Then it stalls again and trades choppily for the next 3 months ( remember when 11 hurricanes in the gulf were a coming, and commodities top on May 11th). Now pay attention, when the commodities topped in May '06 you will see that $GASO dipped to a low of $1.95. Technically what is happening here is that $GASO has rallied up to that May '06 support level this year. Technically this now represents strong resistance for $GASO at $1.95.

$GASO has now rallied for 7 weeks in a row so far this year! This is an unprecedented continuous move on the weekly Chart. This bullish move has not occurred on the weekly chart before when you look back at previous years. Now I ask you this. Why is this bullish reversal in $GASO occurring right now? There has been no news to propel this move. No hurricanes are coming, there is no news out at all about the move in $GASO or Crude. I thought we were in a slow down. I thought all the news about the soft landing would impact $GASO and that has not occurred. The fact that $GASO is up 43% in the last 7 weeks alone on no news is intriguing. Normally a huge move such as this would be pumped up all over the place in the media.

Now I want you to turn your attention to the indicators and oscillators on the weekly chart. You see that the Aroon has had a bullish cross. At the same time you can see massive positive (bullish) divergence present in the RSI, PPO, and Stochastics that has developed off of the lows from September/ October '06 and January '07. Positive divergence = lower lows and then higher highs in the indicators and oscillators. This is signaling a very bullish move, but in the meantime expect a short term pullback off of the highs. I believe this move in $GASO yet at the same time I can't believe it.

Now I want you to turn your attention back to the Daily $GASO chart. Look at where $GASO bottomed at $1.34 and the date, January 15th 2007. Now look at where all the stocks below topped in January. You will see that they all topped at the same time around January 15th 2007. All the momentum stocks shown below topped around the same time when unleaded Gasoline bottomed. The point here is that the momentum stocks are trading inverse to $GASO.

This cannot be coincidental. That is what I want to point out to you. If anyone thinks that no one is paying attention to $GASO, then I am here to tell you otherwise. I also want to forewarn you that the futures in $GASO are pointing to a reversal downwards now. $GASO is now in extremely overbought territory on the daily and is at resistance at $1.95, and the weekly chart just had a bullish cross in the Aroon Indicator. Therefore be prepared for pullback in $GASO and a bounce in the Momentum bullish stocks.

I believe that the recent pullback in the broader market is due to the stealth rise in Unleaded Gasoline and not because of China and all the other things that the media have been chattering about.

Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for
[email protected]

Stock Charts
Stock Charts
Stock Charts
Stock Charts
Stock Charts
Stock Charts