Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Further Declines or Rally for Crude Oil Stocks?

Commodities / Oil Companies Dec 17, 2013 - 06:04 PM GMT

By: Nadia_Simmons

Commodities

In our previous commentary, we examined the situation in oil stocks. Back then, we wrote in the summary:

(...) the outlook for oil stocks remains bullish and the uptrend is not threatened, however, taking into account the medium- and short-term sell signals, further deterioration should not surprise us.

Since that essay was published, we have seen a downward move which took the oil stock index below 1,440. Did this weakness change anything in the overall outlook?


Before we try to answer this question, we'll examine the NYSE Arca Oil Index (XOI) in different time horizons and find out if there's something on the horizon that could drive oil stocks higher or lower in the near future. Let's start with the long-term chart (charts courtesy by http://stockcharts.com).

On the above chart, we see that the situation has deteriorated recently. The oil stock index extended its declines and dropped below the upper line of the rising wedge. From this perspective the breakout that we saw in October was invalidated, which is a strong bearish signal and we may see further deterioration.

To see the current situation more clearly, let's zoom in on our picture and move on to the weekly chart.

In our last essay on oil stocks from Dec. 12, 2013, we wrote the following:

(...) the position of the RSI and the sell signals generated by two other indicators, encouraged sellers to act and triggered further deterioration this week. (...)the upper line of the rising wedge was broken, therefore, the first target for the sellers will be around 1,439, where the bottom of the previous correction is.

Looking at the above chart, we see that the XOI reached its target in the previous week. With this downward move, the oil stock index reached the medium-term support line based on the June and November 2012 lows, which had successfully stopped declines earlier this year. We saw such situations in June, August and also in October. From this perspective, if history repeats itself once again, we may see similar price action this (or next) week. Nevertheless, this time, before we see higher values of the XOI, the buyers will have to break above the upper line of the rising wedge, which serves as major medium-term resistance (currently around 1,463). If they manage to do that, we may see an upward move to at least 1,483 where the resistance level created by the previously-broken 2013 high is. The next upside target will be the psychological barrier of 1,500.

What could happen if the buyers fail? If the sellers push the XOI below the medium-term support line, we will likely see further deterioration and the downside target will be the psychological barrier of 1,400. If it's broken, the next target will be around 1,376, where the bottom of the Sept.-Oct. correction is.

From the technical point of view, the medium-term uptrend remains in place at the moment, and the situation is still bullish.

Now, let's turn to the daily chart.

Looking at the above chart, we see that the XOI declined in the previous week once again and dropped below the bottom of the corrective move that we saw at the beginning of November (at 1,439). In this way, the oil stock index also slipped below the upper line of the rising wedge (marked with the black thin line) and two medium-term support lines (the upper one is based on the June and August lows and the lower one is created by the June and October lows). However, when we take a closer look at the chart, we see that the XOI reversed course after reaching the 38.2% Fibonacci retracement level based on the entire June-November rally. As you can see on the daily chart, this support encouraged buyers to act, and resulted in an upswing, which push the index above the May high.

Despite this growth, the combination of the previously-broken upper medium-term rising support line and the upper line of the rising wedge stopped further improvement and the XOI closed Monday below this resistance zone. If the buyers do not give up and the oil stock index comes back above this line, we may see an upward corrective move to at least 1,456-1,461 where the 50-day moving average and the previously-broken neck line of the head and shoulders pattern are. On the other hand, if the buyers fail, we will likely see a pullback to the lower rising support line (currently around 1,435) or even to the Friday low at 1,421.

Summing up, from the long-, medium- and short-term perspectives, the situation has deteriorated. We saw an invalidation of the long-term breakout (which is a bearish signal). On the other hand, oil stocks reached very a important medium-term support line based on the June and November 2012 lows, which had successfully stopped declines earlier this year. Additionally, the XOI reached the 38.2% Fibonacci retracement level based on the entire June-November rally, which suggests that the sentiment for oil stocks may turn positive in the near future.

Thank you.

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