Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Retirees Are Risking Their Life Savings on Junk Bonds - 29th July 16
The Next Recession is Coming - Expect Around 0% Returns for the Next 7 Years - 29th July 16
SPX is Shaking and Rolling - 29th July 16
Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - 28th July 16
FOMC Interest Rates and Their Impact on the US Economy - 28th July 16
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Crude Oil Price Technical Juncture

Commodities / Crude Oil Mar 15, 2016 - 12:04 PM GMT

By: Nadia_Simmons

Commodities

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

On Friday, crude oil gained 1.24% as rig count declined to the lowest level ever. Thanks to this news, light crude hit a fresh March high, but will we see further rally in the coming week?


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

(...) earlier today, the IEA, said that non-OPEC output would fall by 750,000 barrels per day (bpd) in 2016 compared to its previous estimate of 600,000 bpd. Additionally, U.S. production alone would decline by 530,000 bpd in 2016. Thanks to this news, crude oil futures extended gains in a pre-market trading, hitting a fresh high of $38.95, which suggests that the commodity could also move higher after the market's open and even approach the barrier of $40 later in the day (especially if today's Baker Hughes report would be bullish).

As it turned out, on Friday, crude oil extended gains and hit a fresh high of $39.02 after the Baker Hughes report showed that the total number of U.S. oil rigs dropped by 9 to 480 for the week ending on March 4, which was the lowest level in history (the previous lowest record came on April 23, 1999 when the rig count slipped to 488). On top of that, the number of active U.S. oil drilling rigs dropped by 6 to 386, which was the 12th consecutive week of weekly declines. Thanks to these numbers, light crude re-tested the major resistance levels, but will we see further rally in the coming week? Let's take a look at the charts and find out what can we infer from them (charts courtesy of http://stockcharts.com ).

On the weekly chart, we see that although crude oil moved higher once again, the red declining resistance line (based on the Sep 29, Jun 22 and Oct 12 weekly closing prices) continues to keep gains in check.

Are there any other factors that could encourage oil bears to act? Let's examine the daily chart and find out.

From this perspective, we see that crude oil moved higher once again, hitting a fresh March high. Despite this increase, the red resistance zone is still in play (there wasn't daily closure above it), which in combination with the medium-term picture and the proximity to the barrier of $40 could encourage oil bears to act and trigger a downward move from here in the coming days.

Additionally, we should keep in mind that the daily CCI and Stochastic Oscillator are overbought and there are also negative divergences between them and light crude. On top of that, when we take a closer look at the size of volume that accompanied Friday's increase we clearly see that it was quite small (compared to the volume that we saw last Monday or Wednesday), which suggests that the bulls may weaken.

Finishing today's alert, we'll take a look at the relationship between oil and gold once again.

As you see on the weekly chart, although the oil-to-gold ratio moved higher once again, the green resistance line (based on the Mar and Aug lows) continues to keep gains in check, suggesting that reversal from here is very likely. Why? Because we saw a similar price action in late Jan. Back then the above-mentioned resistance triggered a sharp decline in the following weeks, which increases the probability that history will repeat itself once again and we'll see lower values of the ratio (and crude oil) in the coming week(s).

What about gold? Taking into account the fact that the recent increases in the ratio corresponded to the upward move in gold, it seems that reversal of the ratio will translate into lower values of the yellow metal. Nevertheless, if you would like to know more about gold as an investment , we encourage you to sign up for Gold & Silver Trading Alerts or the All-Inclusive Package that includes it.

Finishing today's alert, we would like to draw your attention to the current situation in crude oil futures, which moved sharply lower in a pre-market trading after Iranian Oil Minister's comments. Bijan Zanganeh said that his country won't join a production freeze deal until Iran increases its output to 4 million barrels a day (bpd). Taking this fact into account, it seems that crude oil will also erase some of recent gains later in the day. If we see such price action, the first downside target would be around $37.21, where the Mar 10 low is.

Summing up, the red resistance zone (marked on the daily chart) and the red resistance line (seen on the weekly chart) continues to keep gains in check (in terms of daily and weekly closing prices). Additionally, the current position of the indicators and the proximity to the psychologically important barrier of $40 suggests that reversal and lower values of the commodity are just around the corner.

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

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

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.


© 2005-2016 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

Catching a Falling Financial Knife