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Short Term Pullback in Brent Crude Oil Price Starts

Commodities / Crude Oil Mar 05, 2012 - 01:03 PM GMT

By: Donald_W_Dony

Commodities

Brent prices have reached, for the short term, a peak. The Atlantic basin commodity has topped out at $128.40 and is now pulling back to the first support level of $120. The trigger for the expected retracement appears to be the US dollar.

Brent prices tend to trade in the opposite direction to the US$. And the Big dollar is beginning to rise again (Chart 1). The currency bounced off of the $0.782 support line in February and is now advancing to a target of $0.805.


Models suggest that Brent should decline this month and find support between $119-$120.

The longer term outlook for the commodity is still for higher price levels. Brent is trending along with global equity markets which are expected to continue advancing in 2012 (Chart 2).

Bottom line: The downward movement in Brent should be brief. With world consumption increasing and anticipated to reach an all time high this year, Brent should advance up to the next target of $148 by year-end.

Investment approach: The natural resource has broken out of a multi-month consolidation in early February. The movement in March is just the first pullback within a longer term increase. Energy sector securities and oil ETFs should respond positively to the advance in Brent this year. However, investors may wish to wait until late March or early April before adding new energy related securities to their portfolios.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2012 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

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