London gas oil futures for June delivery (GSOIL) have been running inside an ascending channel since mid-February, touching an all-time high of 704.13 on May 17. While the rally has stalled since then, with the price set to close at 10-day lows today, the market continues to hold far above the Ichimoku cloud and its moving averages, which are positively sloped, signaling that upward pattern is not near to end. Momentum, though, could weaken in the short-term should the RSI continue to head downwards and the MACD deviate further below its red signal line.
On the downside, the 20-day simple moving average standing at 675.38 could challenge bears as the line has acted as a barrier several times in the past. Therefore, any break below the 20-day SMA could strengthen negative momentum towards the lower bound of the channel around the 665 key-level which coincides with the 23.6% Fibonacci of the upleg from 538.38 to 704.13. In case this fails to hold, the next target could be the 38.2% Fibonacci of 640.60.
Alternatively, a move to the upside could meet the 700 round level before a retest at the peak of 704.13. Even higher, the upper bound of the channel seen around 715 could offer resistance as well.
In the medium-term, the outlook is expected to remain positive as long as the market continues to trade above the 50-day MA currently at 643.97.
