$$ Weekly Energy Report

Jan 19-22, 2010
For annotated charts of $OIH, $UNG and $USO, please go here.

1. OIH

Price closed down $2.63 for the week at $130.19, about halfway between the neutral zone and the outer Keltner Channel (50,4,25). Price recently made a new 15-month high but the breakout failed to ignite. Price remains well above the trend line (~$116).

Momentum: Still watching for any bearish divergence to develop from last week's momentum peak going forward. In addition, looking for any positive reversal to develop. Up trend looks strong.

Volume: Turning towards accumulation after a 2-month breather.

Volatility: We saw the squeeze play work perfectly as price broke out of its consolidation pattern to gain nearly 12% two weeks ago. But now Std Deviation is at a 2-month high, and ADX is at a 9 month high. We may be in for some consolidation as volatility returns to normal.

Last Week's Outlook: Now that OIH has broken out to the upside, the question becomes when to take profits. Watch for bearish divergence between price and momentum when price is at or near the outer Keltner Channel.

Next Week's Outlook: Price could go either way here. Given that the volatility spool appears played out, tighten stops in case of a correction back to the neutral zone.

2. UNG

Price closed down $0.17 for the week at $10.24, but remains in the Keltner (50,1,25) neutral zone. Price has consolidated in a range of $9.78 to $10.96 over the last 22 trading days. Should price start to climb, there is bottom-top resistance at ~$12 (July bottom became a September-October top).

Momentum obeys all the down trend rules (RSI range 62 and below; negative reversals, bull divergence at bottoms). If the bull divergence lines stemming from the old momentum lows are broken to the downside on RSI, the downtrend could accelerate.

Volume: Heavy distribution picture but some short term accumulation last week.

Volatility: With Std Deviation tagging its lower Bollinger Band and ADX under 20 for 2 weeks, the squeeze play is on.

Last Week's Outlook: UNG looks to be consolidating in a range with declining volatility. Be on the alert for a break out. Given the overall picture, any potential break out is likely to be downwards.

Next Week's Outlook: UNG could break out either way soon. Be prepared.

3. USO

Price closed down $2.53 for the week at $38.40, back in the neutral zone. Price is well above the current trend line (~$36), but failed to make a 12-month high last week when it had the chance.

Momentum: RSI corrected hard last week to 45.5. Watch to see if RSI 38 holds - the floor for up trends. Also, watch to see if a short term positive reversal develops in %B compared to the December 21 low (i.e. %B makes a lower low, but price makes a higher low. See dashed lines for an illustration).

Volume: Heavy short term distribution last week.

Volatility: Std Deviation and ADX began to contract last week. No squeeze play.

Last Week's Outlook: With resolution to the upside, we'll see if USO can now push past the $41.50 barrier which has held for 13 months.

Next Week's Outlook: USO failure to beak $41.50 and return to the neutral zone clouds the picture. Watch for a potential positive reversal in %B, and whether RSI 38 holds.