Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

The Oil Price, Where is the Next Buying Opportunity?

Commodities / Crude Oil Jul 13, 2010 - 01:38 PM GMT

By: Keith_Schaefer

Commodities Best Financial Markets Analysis ArticleBrian Hoffman writes: About six months ago I wrote that the technical outlook for oil prices indicated oil prices may drop in the event of a downward breakout from the rising wedge that had formed in the price chart for light crude oil, or that prices should find support at US$85 per barrel if an upward breakout were to occur from that price level.  A downward breakout occurred and we are now looking at the possibility of even lower oil prices over the next few months.


First, a refresher on wedge chart formations, which are continuation patterns such that a rising wedge is a temporary pause in a falling price trend, and a falling wedge is a temporary pause in a rising price trend.  During the formation of a rising wedge the selling pressure on prices has started to overwhelm the buying pressure resulting in the slope of the top trend line (resistance) tilting towards the bottom trend line (support).  If the support provided by the bottom trend line fails to hold prices and a downward breakout occurs, a sharp and significant price drop may follow.

Oil prices are currently trying to find support at US$70, and the next strong support level is at US$60, which would result in a retracement of about 50 per cent of the move from the US$32 low of early 2009 to the recent high of US$88 high.  If oil prices were to drop as low as US$60 and find support at that level the stage could be set for the next rally in oil prices.  On the upside, oil prices need to break through US$90 and find support at that level in order to reverse the current bearish trend.

Another bearish indicator for oil is the recent breach in the uptrend in the Relative Strength Index (RSI).  RSI is a momentum indicator, or oscillator, that measures the relative strength of the price of a security or, in this case, a commodity against itself.  A buy signal is triggered when an upward breakout in the RSI is confirmed by an upward breakout in price.  Conversely, a sell signal is triggered when a downward breakout in the RSI is confirmed by a downward breakout in price.  A sell signal was triggered in May (see bottom panel in the chart above).  Notice the price action for oil the last time the RSI uptrend line was breached in June 2008, which definitely confirmed the sell signal at that time.

Oil prices have several support levels below US$60, but a breach of the US$60 support level could result in prices dropping a lot lower and potentially retesting the US$32 low from late 2008.  Although such a scenario is extreme, it is within the realm of possibilities given the technical weakness in broader market indexes, including the energy sector (see below), as well as the ongoing global financial deleveraging process and the austerity measures that the future holds.

The price charts for the United States Oil Fund, LP (USO-NYSE, US$34.23), an ETF that tracks the performance of light crude oil prices, and the iShares CDN S&P/TSX Capped Energy Index Fund (XEG-TSX, $17.64), an ETF that tracks large-cap Canadian oil and gas companies, are shown below.  Notice the similarities in those price charts to the chart for light crude oil prices above in terms of downward breakouts from rising wedges and the sell signals triggered from breaches of the RSI uptrend lines along with the downward price breakout confirmations (the horizontal lines in the charts below indicate near-term support levels).  The noticeable differences with the XEG ETF’s price action are that the downward breakout from its rising wedge occurred a lot sooner and the price failed to exceed the January price high during the seasonally strong February to May period.  With oil prices performing better than the share prices of oil companies that is a bearish indicator for the XEG ETF.

Conclusion: Oil prices may drop to US$60 over the next few months if they fail to find support at US$70, which will impact oil-related investments.  Watch support levels on positions of oil sector investments as the share prices of some oil companies have already breached their support levels.  If oil prices drop to US$60 then wait for support to firmly establish at that level before taking positions in oil-related investments.  This scenario may take until October to play out, which may present an ideal entry point in November.

This Technological Revolution Allowed Me to Earn Short-term Oil & Gas Profits of 146.1%
 New technologies – at this very moment – are revolutionizing the oil and gas exploration industries.
 But only a handful of people truly understand how the technology works.
 This remarkable scenario creates an enormous, short-term profit opportunity each time a company employs these new technologies successfully.
 I’d like to show you exactly how this scenario is unfolding…and how you can pounce on the next triple-digit oil & gas blockbuster.
 Click here to read my full report that explains how to get started. 

Brian Hoffman, CA, CPA, is an affiliate of the Market Technicians Assoc. and a member of the Canadian Society of Technical Analysts (E-mail: bk.hoffman@rogers.com)

About Oil & Gas Investments Bulletin

Keith Schaefer, Editor and Publisher of Oil & Gas Investments Bulletin, writes on oil and natural gas markets - and stocks - in a simple, easy to read manner. He uses research reports and trade magazines, interviews industry experts and executives to identify trends in the oil and gas industry - and writes about them in a public blog. He then finds investments that make money based on that information. Company information is shared only with Oil & Gas Investments subscribers in the Bulletin - they see what he’s buying, when he buys it, and why.

The Oil & Gas Investments Bulletin subscription service finds, researches and profiles growing oil and gas companies.  The Oil and Gas Investments Bulletin is a completely independent service, written to build subscriber loyalty. Companies do not pay in any way to be profiled. For more information about the Bulletin or to subscribe, please visit: www.oilandgas-investments.com.

Legal Disclaimer: Under no circumstances should any Oil and Gas Investments Bulletin material be construed as an offering of securities or investment advice. Readers should consult with his/her professional investment advisor regarding investments in securities referred to herein. It is our opinion that junior public oil and gas companies should be evaluated as speculative investments. The companies on which we focus are typically smaller, early stage, oil and gas producers. Such companies by nature carry a high level of risk. Keith Schaefer is not a registered investment dealer or advisor. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer to buy or sell the securities mentioned, or the giving of investment advice. Oil and Gas Investments is a commercial enterprise whose revenue is solely derived from subscription fees. It has been designed to serve as a research portal for subscribers, who must rely on themselves or their investment advisors in determining the suitability of any investment decisions they wish to make. Keith Schaefer does not receive fees directly or indirectly in connection with any comments or opinions expressed in his reports. He bases his investment decisions based on his research, and will state in each instance the shares held by him in each company. The copyright in all material on this site is held or used by permission by us. The contents of this site are provided for informational purposes only and may not, in any form or by any means, be copied or reproduced, summarized, distributed, modified, transmitted, revised or commercially exploited without our prior written permission.

© 2010, Oil & Gas Investments Bulletin

Contact Us:
nichola@oilandgas-investments.com
Customer Service: 1-877-844-8606
www.oilandgas-investments.com

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules