The Nordpool electricity market has a daily spot price and a Forward market price. The spot price shows the daily price, and the forward market is for companies that want to hedge their 2011 and/or 2012 prices. There is a difference between spot prices, 2011 prices and 2012 prices, which is why we are showing each type separately. Hedging recommendation (updated ad hoc)Prices are now crossing above the short term moving average as forecasted. We still anticipate that this is a short term correction, so we should be careful about hedging. All hedging should be done according to the risk policy of your company. As prices are above the short term moving average it is permitted to do a short term hedge now. But a risk adverse approach is not to initiate a hedge as long as the price remains below 46.5 EUR.
Hedging history:
April 2010: We advised to make a new short hedge at 44 EUR (if a medium term hedge wasn't already done in December 2009 - see below).
December 2009: We advised to hedge at 40 EUR, in two stages:
1. Start a short term hedge at 40 EUR.
2. If prices move above 42 EUR we can do hedging on a longer time frame, up to medium term hedge in order to avoid a price increase up to 48 EUR (medium price target).
3. But we should still avoid long term hedging in anticipation of a renewed downtrend after the medium or high price target has been reached. Fundamental AnalysisElectricity Forward 2011 is a financial instrument. Please see "Electricity Spot" for the fundamental analysis on the Electricity market. | Technical Analysis (updated weekly)Short term (0-5 months):
A few weeks ago we changed the short term arrow to red, forecasting a price increase up to roughly 45 EUR. Prices have reached this level now. It is now important to watch the trendline at 46 EUR. If prices stay below this line, then we are dealing with a very short increase, as we expected. But a break above the 46 EUR trendline means that the situation is changing. The most likely interpretation of this is a new increase up to a 52 EUR level. We will go more into this if we break above the 46 EUR trendline. But right now the current increase is manifesting as per our earlier forecast.
Our earlier forecast was: After reaching our long time price target of 48 EUR in May 2010 we have seen a strong decline down to 41 EUR. This part followed our inital forecast quite closely (Part 3 of this gameplan was: "Prices should continue down towards the long term moving average. When we reach this level we can see if we break below and start a major downtrend or not"). During July we have precisely reached the long term moving average in the small graph as forecasted, and prices did not manage to stay below more than a few days. This meant that we forecasted for the short term: Prices will continue to correct up a little while longer - perhaps reaching 45 EUR. All of this is still within the overall structure of a sideways market. August 2010: Should we break out of this sideways trend (ie. above the black trendline and above the RSI 60) then we are dealing with a new uptrend.
Medium term (6-12 months):
A medium term uptrend started in March 2009 at 30 EUR and it is still active. It is plausible that the medium term uptrend ended on 3. May 2010. That would then have been a 14 month uptrend. We are not certain that the uptrend has ended, but it is plausible, given that we have reached our 48 EUR price target and see a price decline. This fits our statements during the past months: "So we are currently just watching if the medium term trend will end at 48 EUR (or 52 EUR), before a new downtrend will set in". The theoretical top point should be in the summer of 2010, and "3. May" would fit that. If that is right, then we are in the early stage of the next downtrend. But as long as prices stay above the long term moving average (in the big graph) we cannot be sure yet.
Major trend (1-3+ years):
Prices are still above the long term moving average, which is an uptrend. But the RSI remains in the RSI 40-60 level. Basically this means a sideways trend. The RSI is very close to 60 now, and so we have to monitor carefully if we break above or not. The MACD is still below the zero line, so the current uptrend is not a major uptrend, but a medium term upward correction. The increase we have seen since January 2009 was forecasted, but we have continually said: "This will not be the start of a major uptrend" but basically 'just' a medium term trend (this verdict is still under evaluation and cannot be determined valid yet). This meant that our estimate was an increase that should end roughly at 44-48 EUR and then continue the downtrend. We have reached 48 EUR and so the forecast has been ok so far. Now we just have to monitor whether we are starting an uptrend (above RSI 60) or whether the sideways trend will continue. Business Cycle analysisElectricity Forward 2011 is a financial instrument. Please see "Electricity Spot" for the Business Cycle analysis on the Electricity market. |