Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Do Oil Stocks Have Better Upside Potential Than Crude Oil Price?

Commodities / Crude Oil Oct 30, 2013 - 03:58 PM GMT

By: Nadia_Simmons

Commodities

In the previous week the price of crude oil not only dropped below the psychological barrier of $100, but also reached a new four-month low of $95.95. On the other hand, the buyers managed to push light crude higher at the end of the last week. Earlier this week we saw further improvement and the price climbed to almost $99 per barrel.

Taking the above circumstances into account, you are probably wondering what impact they had on oil stocks. Before we examine the current situation with the oil stock index, let’s focus on the relationship between the WTI and the XOI in the short term.


At the beginning of the previous week, we saw strong negative correlation between light crude and oil stocks. Crude oil declined below the 50% Fibonacci retracement level and broke below the lower border of the declining trend channel. At the same time, the oil stock index continued its rally and reached a new monthly high. The relationship between the WTI and the XOI reversed on Wednesday and we noticed declines on both daily charts. On Thursday, crude oil hit a new monthly low. Meanwhile, oil stocks hit the bottom of the corrective move. In the following days we saw growths in both cases. The XOI reached a new monthly high and crude oil came back in the range of the declining trend channel.

Although WTI and XOI have been moving in the same direction in recent days, it seems that after weeks of negative correlation it’s still too early to say that this is a meaningful reversal of the current tendency – especially, when we take into account yesterday’s price action in both cases. On Tuesday, the oil stock index hit a fresh monthly high at 1,481 and broke above the 78.6% Fibonacci retracement level. Meanwhile, crude oil dropped to the lower border of the declining trend channel, which confirms the assumption that the recent positive correlation might be just a temporary phenomenon.

With the above in mind, let's take a look at the NYSE Arca Oil Index (XOI) charts to find out what the current situation in the oil stock market is. Let’s start with a look at the long-term chart (charts courtesy by http://stockcharts.com).

On the above chart we see that the XOI broke above the upper line of the rising wedge. The breakout, however, is not yet confirmed. Please note that in this area there’s a very important Fibonacci retracement level - 78.6% (close to 1,467) based on the entire May-October 2008 decline, which may slow the rally. However, if the buyers don’t give up and manage to push the oil stock index above this resistance, we will likely see further growth.

The XOI still remains above the previously-broken long-term declining resistance line based on the 2008 and 2011 highs and the breakout hasn’t been invalidated. Therefore, taking these observations into account, the situation is very bullish.

To see this more clearly, let’s zoom in on our picture and move on to the weekly chart.

As you can see on the above chart, the oil stock index continued its rally in the previous week and broke above the upper line of the rising wedge (marked with the red bold line). However, the breakout is not confirmed at the moment.

Please note that earlier this week, the buyers pushed the XOI higher, which resulted in a new monthly high at 1,481. At this point, it’s worth mentioning that this area is reinforced by the upper line of the smaller rising wedge (marked with the black line) - currently around 1,480. Therefore, further increases may be restrained by this resistance, especially when we take into account the position of the RSI. This indicator almost reached the 70 level, which may indicate a corrective move in the near future. Please note that we saw similar price action several times in the previous months.

Nevertheless, from the medium-term point of view, the uptrend is not threatened at the moment, and the situation remains bullish.

Now, let’s turn to the daily chart.

Looking at the above chart, we see that at the beginning of the previous week, the XOI broke above the Oct. 18 high and climbed to a new monthly top at 1,470. In this way, the XOI broke above the 78.6% Fibonacci retracement level (close to 1,467) based on the entire May-October 2008 decline. However, this strong resistance level stopped further increases and encouraged sellers to trigger a correction. Although they pushed the oil stock index to 1,441, this deterioration was only temporary and oil stocks rebounded at the end of the week.

Yesterday, the oil stock index continued its rally and hit a fresh monthly high at 1,481. With this growth, oil stocks broke above the 78.6% Fibonacci retracement level (close to 1,467) based on the entire May-October 2008 decline and closed the day above it, which is a strong bullish sign. If the breakout above this strong resistance is confirmed and the buyers push the XOI higher, we may see further increase to the psychological barrier of 1,500. If this resistance level is broken, the next target level will be around 1,560.

However, we should keep in mind that the RSI almost reached the 70 level, which is a bearish sign. Therefore, we may see a corrective move in the near future. Please note that we saw similar price action several times in the previous months (marked with red arrows on the above chart).

Looking at the daily chart we can see a gap between Monday’s high and yesterday’s open (1,471-1,473.98), which serves now as support. The next support level is the bottom of the recent corrective move at 1,441. A further one lies at 1,428-1,430 and it is based on the May and September highs.

Summing up, from the long-, medium- and short-term perspectives the outlook for oil stocks remains bullish and the uptrend is not threatened at the moment. Taking into account the combination of resistance levels and the position of the RSI, we should keep an eye on the oil stock index because the sellers may trigger a correction in the coming days. However, if they fail and oil stocks confirm the breakout above the 78.6% Fibonacci retracement level and the upper line of the smaller rising wedge (marked with the black line on the weekly chart), we will likely see further growth to at least 1,500. If this level is taken out, the next strong resistance will be around 1,560.

Thank you.

Nadia Simmons

Sunshine Profits‘ Contributing Author

Oil Investment Updates
Oil Trading Alerts

* * * * *

 

Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2019 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