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Two Strikes Against Light Crude Oil Prices

Commodities / Crude Oil Sep 14, 2014 - 06:06 PM GMT

By: Donald_W_Dony

Commodities

Following the August 26, 2014 Market Minute titled "WTIC prices break down", Light crude oil prices has fallen 5.9% since late August.

Abundant supply from the U.S. and the Middle East plus a rising U.S. dollar has sent oil prices down to the first support level at $92.


As both elements (excessive supply and an advancing US$) are still in-play, we believe that the downward trend for oil is not finished and that WTIC will ultimately decline to the 2nd support line at $86.

Bottom line: Under the weight of record inventory levels and a rising U.S. dollar, Light crude oil prices has broken a multi-year consolidation pattern in August.

Though WTIC has fallen 5.9% in the past three weeks, we believe oil prices have another 6% downside exposure in Q4 and will ultimately reach $86.

Investment approach: We suggest investors use any counter trend strength to reduce their exposure to energy at this time.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2014 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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