Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
SPX/Gold, 30yr Yields & Yield Curve – Amigos 1, 2 & 3 Updated - 21st Oct 18
Gold Stocks Sentiment Shifting - 21st Oct 18
Why Is the Weakness In GBP/USD Likely? - 21st Oct 18
Stock Market Bubbles, Balloons, Needles and Pins - 21st Oct 18
The Incredibly Bullish Set-Up for Gold - 20th Oct 18
Here Comes the Stock Market Retest - 20th Oct 18
Waterproof Camera - Olympus Tough TG-5 Setup and First Use - 20th Oct 18
Israel’s 50-Year Time Bomb, Pushing Palestinians to the Edge - 19th Oct 18
Bitcoin Trend Analysis 2018 - 19th Oct 18
History's Worst Stock Market Crash and the Greatest Investing Lesson! - 19th Oct 18
More Signs of a Stocks Bull Market Top and Start of a Bear Market in 2019 - 19th Oct 18
Stock Market Detailed Map Of Expected Price Movement Before The Breakout - 18th Oct 18
Determining the Outlook for Gold Mining Stock - 18th Oct 18
Investor Alert: Is the Trump Agenda in Peril? - 18th Oct 18
Stock Market is Making a Sharp Rally After a Sharp Drop. What’s Next? - 18th Oct 18
Global Warming (Assuming You Believe In It) Does Not Affect Gold - 18th Oct 18
Best Waterproof Compact Camera Olympus Tough TG-5 Review - Unboxing - 18th Oct 18
Silver's Time Is Coming - 17th Oct 18
Stock Market Volatility Breeds Contempt - 17th Oct 18
Gold 7-Year Bear Market Phase Is Over - 17th Oct 18
Gold - A Golden Escape - 17th Oct 18
Tec Stocks Sector Set For A Rebound? - 16th Oct 18
Real Estate Transactions are Becoming Seamless with Blockchain-Powered Data Sets - 16th Oct 18
Important Elements of a Viral Landing Page - 16th Oct 18
Stephen Leeb Predicts 3-Digit Silver and 5 Digit Gold?! - 16th Oct 18
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Crude Oil Price Sharp Drop

Commodities / Crude Oil Mar 06, 2014 - 05:21 PM GMT

By: Nadia_Simmons

Commodities

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.

On Wednesday, crude oil lost 2.27% as tensions cooled in Ukraine and U.S. supply data missed investors’ expectations. Because of these circumstances, light crude erased all its gains from Monday's jump and dropped below $101 per barrel.


Yesterday, soft U.S. service-sector data weakened the price of light crude and pushed it below $103 per barrel. The ADP nonfarm payrolls data showed that the U.S. private sector added 139,000 jobs in February, well below expectations for an increase of 160,000. Additionally, the ISM's purchasing managers' index fell to 51.6 in February from 54.0 in January (while analysts had expected a drop to 53.5 in February). At this point, it’s worth noting that February's PMI is the lowest since February 2010.

Later in the day, the U.S. Energy Information Administration showed in its weekly report that U.S. crude oil inventories rose by 1.4 million barrels in the week ended Feb. 28, missing expectations for an increase of 1.3 million barrels. Although this increase was largely in line with market expectations (and the price of light crude declined only slightly from its prior level after the report's release), distillate stockpiles (which were expected to fall by 1.1 million barrels but instead rose by 1.4 million barrels) disappointed investors and sent crude oil to its lowest level in more than two weeks.

Having discussed the above, let’s move on to the technical changes in crude oil (charts courtesy of http://stockcharts.com).

Quoting our last Oil Trading Alert:

(…) light crude closed the day below February high, which is not a positive signal (…) when we factor in the current position of the indicators, it seems that further deterioration is just around the corner (…) the RSI and Stochastic Oscillator generated sell signals, while the CCI is very close to doing it. If oil bulls do not trigger a corrective upswing today, crude oil may extend losses and drop to the upper line of the rising trend channel.

Looking at the above chart, we see that although the buyers tried to push the price higher, they failed, which triggered a sharp decline in the following hours. With this downswing, crude oil not only dropped to the upper line of the rising trend channel, but also reached the December high. If this support line is broken, we will see further deterioration and the first downside target will be the lower border of the rising trend channel, which is slightly above the 38.2% Fibonacci retracement level based on the recent rally (which corresponds to the 200-day moving average at the moment). Looking at the position of the indicators, we see that the CCI generated a sell signal (while the Stochastic Oscillator declined below the level of 80), which supports sellers and suggests that the bearish scenario is likely to be seen in the coming day.

Having discussed the current situation in light crude, let’s take a look at WTI Crude Oil (the CFD).

In our previous Oil Trading Alert, we wrote the following:

(…) WTI Crude Oil declined to the very short-term rising support line (marked with dark green). If it is broken, we will see a drop to the upper line of the rising wedge (marked with thin blue lines) (…) the CCI and Stochastic Oscillator generated sell signals, which supports the bearish scenario and suggests further deterioration.

As you see on the daily chart, after a breakdown below the very short-term rising support line, oil bears not only pushed the CFD under the upper line of the rising wedge, but also approached the lower border of this formation. If this support line encourages buyers to act, we may see a corrective upswing to one of the previously broken support lines, which serve as resistance at the moment. However, looking at the position of the indicators (sell signals remain in place, supporting sellers), it seems that further deterioration is more likely. If this is the case, the first downside target will be the 38.2% Fibonacci retracement based on the entire rally.

Summing up, the very short-term (and also the short-term) outlook for crude oil has deteriorated as crude oil extended declines and dropped to the rising trend channel range, reaching a support level created by the December high at the same time. As mentioned earlier, if oil bears push the price below it, we will see further deterioration and a drop to the lower border of the rising trend channel or even to the 38.2% Fibonacci retracement level and the 200-day moving average. Please note that this bearish scenario is also reinforced by the current position of the indicators (sell signal in crude oil and also in the CFD remain in place, supporting sellers).

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: bullish
LT outlook: mixed

Trading position (short-term): In our opinion, if crude oil drops below the 38.2% Fibonacci retracement level and the 200-day moving average, we will consider opening short positions.

Thank you.

Nadia Simmons

Sunshine Profits‘ Contributing Author

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts, and Oil Investment Updates.

* * * * *

 

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.


© 2005-2018 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