Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Crude Oil Price Breakdown or Trap?

Commodities / Crude Oil Jun 19, 2014 - 09:18 AM GMT

By: Nadia_Simmons

Commodities

On Tuesday, the price of crude oil wobbled between gains and losses throughout the session as mixed data and profit taking weighed on investors' sentiment. As a result, light crude reversed after an increase to the resistance zone and declined below an important medium-term support line. Will this event be strong enough to trigger a sizable correction?


As you know from our previous Oil Trading Alerts, the major factor that has driven crude oil higher in recent days was the deteriorating situation in Iraq - the seventh-largest oil producer in the world last year and OPEC's second-most-important producer country. Thanks to the Iraqi crisis, light crude increased to a nine-month high, but it seems that the impact of the Iraq violence on the price could be short-lived as investors figured out that active oilfields remain far south from the insurgency and disruption fears are overdone - especially when we take into account the fact that U.S. oil production is booming and most of that oil cannot be exported under current law.

Additionally, mixed data encouraged oil investors to jump to the sidelines. Yesterday, the Commerce Department reported that housing starts dropped by 6.5% in May, while the number of building permits issued fell by 6.4% in the previous month. Although these numbers disappointed, upbeat inflation data supported crude oil. Please note that the Labor Department reported that the U.S. CPI rose 2.1% on year in May and 0.4% from April.

How did these circumstances influence the technical picture? Let's check (charts courtesy of http://stockcharts.com).

Looking at the weekly chart, we see that the situation has deteriorated slightly as crude oil moved lower and reached the rising black support line. If it holds, we will likely see another attempt to break above the long-term declining line, which triggered a pullback earlier this week. However, taking into account the position of the indicators (the CCI and Stochastic Oscillator are overbought), it seems to us that further deterioration is just around the corner - especially if crude oil breaks below its major medium-term support line (marked with black).

Will we see such price action in the coming days? Let's take a closer look at the daily chart.

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

(...) the initial downside target for oil bears will be the previously-broken medium-term black rising line (currently around $106.60), which stopped further deterioration on Friday. (...) if this line holds, we may see another attempt to break above the resistance zone. However, if it is broken, the current correction will accelerate and the commodity will find support around $104.55, where the upper line of the medium-term triangle (marked with blue) is.

From this perspective, we see that although oil bulls tried to realized the above-mentioned scenario, they failed and the commodity declined under the medium-term black rising line, closing the day slightly below it. In our opinion, this is a bearish signal, which suggests further deterioration. We are convinced that the current correction will accelerate, if light crude drops under the black dashed support line (currently around $105.95) and the CCI and Stochastic Oscillator generate sell signals. In this case, the above-mentioned downside target around $104.55 will be in play. Meanwhile, as long as crude oil remains around its black support line, another try to climb above the resistance zone can't be ruled out.

Summing up, although crude oil moved higher, the strong resistance zone created by the long-term declining line and two important Fibonacci retracement levels triggered a pullback, which took the commodity below the medium-term black rising line. Taking this fact into account, we remain bearish and think that if light crude declines from here, we'll see a drop to at least the medium-term blue support line (around $104.55).

Very short-term outlook: bearish

Short-term outlook: mixed with bearish bias

MT outlook: mixed

LT outlook: mixed

Trading position (short-term; our opinion): Short. Stop-loss order at $109.20.

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


© 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