Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Crude Oil Price Outlook

Commodities / Crude Oil Dec 06, 2013 - 06:37 AM GMT

By: Nadia_Simmons

Commodities

In our previous essay we focused on the oil-stocks-to-oil ratio and its implications for oil stocks. However, at the end of November we checked this ratio to find out what impact it could have on future crude oil's moves. At that time we wrote the following:

(...) the first thing that catches the eye on the above chart is a strong negative correlation between the ratio and the price of light crude.(...) the ratio remains in the gap between the April 2009 low and May 2009 high (...). In all previous cases, such a position of the ratio triggered a correction, which resulted in higher prices of light crude. Additionally, the ratio has approached the 38.2% Fibonacci retracement level (based on the entire 2009-2011 decline), which is a strong resistance level. Taking the above into account, if history repeats itself once again and the ratio declines, we will likely see the bottom of the current correction.


Since that essay was posted, the ratio moved higher and broke above the 38.2% retracement and the September 2009 high. However, at the end of the previous week, both breakouts were invalidated, which was a bearish signal for the ratio and bullish for crude oil. What impact did these circumstances have on light crude? It is said that one picture is worth a thousand words, therefore, let's jump straight into the world of charts and take a look at them in different time horizons. Let's start with a look at the monthly chart of light crude (charts courtesy by http://stockcharts.com).

In our essay on crude oil from Nov.7, 2013 we wrote:

(...) there are two long-term declining support lines. The blue one is based on the July 2008 and February 2012 highs. When we take this line into account, we see that crude oil broke below it the previous week, which is a bearish sign. However, if we take into account the black long-term support line (based on the July 2008 and May 2011 highs), we see that light crude still remains above it and the situation is not that bearish.

In spite of a drop to a fresh November low, crude oil remained above the black long-term support line based on the July 2008 and May 2011 highs. On top of that, in recent days the situation has improved as light crude climbed above the blue long-term declining support/resistance line. In this way, the breakdown below this line was invalidated, which is a strong bullish sign.

Now, let's zoom in on our picture of the oil market and see the weekly chart.

As you can see on the above chart, after three unsuccessful attempts to break below the medium-term support line (marked with the black bold line) oil bears showed their claws and finally pushed the price of light crude below this important support level in the previous week.

Looking at the above chart, we see that after the breakdown below this level crude oil reached its 200-week moving average and pulled back. Despite this fact, it closed last week below the medium-term support line, which was not a positive sign for oil bulls. However, the breakdown was not confirmed. As it turned out, earlier this week, crude oil rebounded sharply and the breakdown was invalidated, which is a strong bullish signal.

Now, let's check the short-term outlook.

As you can see on the above chart, the situation deteriorated in the previous week. After an invalidation of the breakout above the lower border of the declining trend channel (in terms of intraday lows), crude oil verified the breakdown and declined. Oil bulls didn't manage to hold the November low and the price hit a fresh monthly low of $91.77. Light crude dropped to the next support level created by the May low (in terms of daily closing prices).

In spite of this drop, last Friday, crude oil rebounded, but the upper shadow of daily candlestick suggested that the proximity to the lower border of the declining trend channel had a negative impact on the price.

As a reminder, at the end of last month, crude oil broke above this resistance level and came back in the range of the declining trend channel in terms of intraday lows. Back then, the proximity to the upper border of the declining trend channel in terms of daily closing prices (marked with the red dashed line) encouraged oil bears to act and light crude invalidated the breakout, which resulted in a new monthly low.

Earlier this week, oil bulls didn't give up so easily and pushed crude oil above both major short-term resistance levels. Additionally, Tuesday's breakout materialized on relatively high volume, which confirmed the strength of the buyers. Yesterday, we saw further improvement as crude oil closed the day above $97 for the first time since the end of October.

Summing up, the short-term situation has improved in recent days as crude oil broke above both short-term resistance lines on relatively high volume. Additionally, light crude came back above the previously-broken medium-term support line and the long-term one, which is another bullish signal. Taking these facts into account and combining them with declines in the oil-stocks-to-oil ratio we can assume that the worst is already behind oil bulls and further improvement is likely.

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