May heating oil has broken out of a nearly month long consolidation.
Since the June high of 3.0074, May heating oil futures fell to a low of 1.5566 in January--a nearly 50% decline. On January 30 the price started rallying, reaching a 2015 high of 1.9383. In March the price pulled back to 1.6490, and then consolidated between that low and a narrow range high of 1.7996. On April 13 the price broke above 1.7996 and has continued to the upside over the following sessions.
The break higher means a higher low is now in place, and a tentative uptrend is underway. Fibonacci extension levels put a likely target right near 2.02 (100% level). If the price falters, it could do so near 1.9 or the 2015 high near 1.980. These levels line up with the 61.8% and 78.6% Fib extension levels.
Figure 1. May Heating Oil with May Crude Oil (Pink Line), Daily Chart
Heating oil is highly correlated with crude oil. The May crude contract is fast approaching its 2015 high of 56.08. If that is exceeded the outlook for crude improves (see Crude Oil: Completes Small Head and Shoulders Bottoming Pattern), and thus so does the outlook for heating oil. The longer-term downtrend is still a factor though. Near aforementioned heating oil (potential) resistance levels, aggressively traders will be looking for potential shorting opportunities