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
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
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Crude Oil Price Meets Solid Resistance

Commodities / Crude Oil May 05, 2015 - 02:31 PM GMT

By: Nadia_Simmons

Commodities

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

Although crude oil hit a fresh 2015 high on Friday, an increase in Iraq's export levels and a stronger greenback weighed on investors' sentiment and pushed the commodity lower. As a result, light crude lost 0.85% and closed the day under the previous high. Where will crude oil head next in the coming week?

On Friday, Baker Hughes showed in its weekly report that oil rigs fell by 24 last week to 679. With this drop, the number of active rigs has fallen for a record 21 weeks in a row (the lowest level since September 2010), but the pace of slowdown continued to decrease, which raised worries over another increase in domestic crude oil inventories.


Additionally, a stronger greenback and Thursday's news that OPEC's supply levels climbed to 31.04 million barrels per day in April (which was the highest level in two years), while Iraq's export levels increased to a record-high of 3.08 million bpd pushed the price of crude oil lower. As a result, the commodity closed the previous week under the solid resistance zone. Will we see a breakout above it in the coming week? (charts courtesy of http://stockcharts.com).

The first thing that catches the eye on the weekly chart is a breakout above the resistance zone created by the Dec 15 and Dec 22 highs. Additionally, the commodity closed the week above it, which is a bullish signal. However, when we take a closer look at the chart, we notice that the size of volume that accompanied last week's upward move wasn't huge (compared to what we saw at the beginning of the month). This means that oil bulls might not be as strong as it seems at the first sight. On top of that, the current position of the indicators (the CCI and Stochastic Oscillator are overbought) suggests that reversal is just around the corner (even if oil bulls try to push light crude higher and test the barrier of $60 once again).

Are there any other factors that could stop the rally?

Looking at the monthly chart, we see that crude oil re-tested the previously-broken long-term blue resistance line, but as you see on the chart, this solid resistance in combination with the 200-mont moving average (which serves as an additional barrier for oil bulls) stopped further improvement. Therefore, we believe that as long as there is no breakout above this area further improvement is not likely to be seen and correction of the recent rally should not surprise us.

How low could the commodity go? Let's examine the daily chart and find out.

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

(...) the commodity reversed and closed the day below the previous high, invalidating earlier breakdown. Additionally, the size of volume that accompanied yesterday's increase is quite small (compared to what we saw in mid-Apr), which doesn't confirm oil bulls' strength (...) there are negative divergences between the RSI, CCI, Stochastic Oscillator and the commodity (...), which is a negative signal. All the above doesn't bode well for crude oil and suggests that the space for further growth might be limited (...) (even if oil bulls try to push light crude higher and test the barrier of $60

As you see on the daily chart, the situation developed in line with the above scenario. Although crude oil moved little higher and hit a fresh 2015 high of $59.90, all negative signals from our last commentary in combination with the long-term resistance zone encouraged oil bears to act. As a result, light crude slipped to the grey support lines, which triggered a rebound in the following hours. Despite this increase, the commodity closed the day below the previous high, invalidating earlier breakdown (similarly to what we saw on Wednesday). This is a negative signal, which suggests that further deterioration is just around the corner (even if oil bulls try to push light crude higher and test the barrier of $60 once again).

If this is the case, and the commodity declines below grey support lines, the initial downside target would be around $57.70, where the upper border of the declining trend channel is. If it is broken, we could see a drop to around $55 (the lower line of the formation) or even to the green support zone based on the Feb highs ($53.99-54.24).

Summing up, although crude oil hit a fresh 2015 high and closed the previous week above the Dec 15 and Dec 22 highs, the solid resistance zone created by the long-term blue resistance line and the 200-month moving average(marked on the monthly chart) still keeps gains in check. Therefore, we believe that as long as there is no breakout above this area further improvement is not likely to be seen and correction of the recent rally should not surprise us (especially when we factor in an invalidation of the breakout above the previous high and the size of volume that accompanied last week's upward move).

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish
Trading position (short-term; our opinion): No positions.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing list today

* * * * *

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