Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Crude Oil and Gold, Silver Precious Metals Link

Commodities / Crude Oil Dec 08, 2016 - 03:54 PM GMT

By: Nadia_Simmons

Commodities

Trading position (short-term; our opinion): Short positions (with a stop-loss order at $54.51 and initial downside target at $45.43) are justified from the risk/reward perspective.

On Tuesday, crude oil moved lower and lost 1.66% after data showed that OPEC production rose to about 34.2 million barrels per day in Nov, hitting another record high. In this environment, light crude slipped under $51 and approached the barrier of $50, and thus the short position that we had opened early during yesterday’s session were already profitable at its end. Will we see a drop below the key $50 level in the coming days?


Let’s take a look at the charts below to find out (charts courtesy of http://stockcharts.com).

Quoting our yesterday’s alert:

(…) the commodity pulled back, which took the price not only under the previously-broken Oct peak, but also below the upper border of the blue rising trend channel, which means an invalidation of earlier breakouts.

Such price action doesn’t bode well for the commodity – especially when we factor in the fact that yesterday’s increase materialized on a smaller volume once again (as a reminder, the size of volume that accompanied recent increases (since Wednesday) has steadily decreased, which suggests that the rally is running out of steam). Additionally, the CCI and Stochastic Oscillator climbed to the highest levels since Oct, which increases the probability of reversal in the coming days.

From today’s point of view, we see that oil bears pushed the commodity slightly lower as we had expected. With this move, light crude dropped to the previously-broken red rising support line (based on the Aug and Sep lows), approaching the Friday’s low and the barrier of $50.

When we take a closer look at the daily chart, we notice that this area encouraged oil bulls to act at the end of the previous week, which suggests that we may see a rebound later in the day. Nevertheless, even if we see such price action, we should keep in mind that invalidation of the breakout above the Oct high continues to have bearish implications and so do other factors: the rising, medium-term black resistance line and the upper border of the blue rising trend channel. Therefore, we believe that as long as there is no confirmed breakout above the combination of the above-mentioned solid resistance levels, all upswings will be nothing more than a verification of earlier breakdown.

Additionally, the Stochastic Oscillator generated a sell signal (we will view the signal as confirmed once it moves below the 80 level, but the implications of indicator’s move below its red signal line are already bearish) and the size of volume increased slightly during yesterday’s decline, which in combination with the picture that emerges from the oil-to-gold and oil-to-silver ratios raises doubts about the continuation of the recent rally in the coming days.

When we take a look at the chart below, we see that the oil-to-gold ratio moved lower, which means that what we wrote yesterday is up-to-date also today:

On the long- and medium-term charts, we see that the ratio reached the upper border of the red zone, which is the key resistance at the moment. Therefore, even if we see another attempt to move higher, in our opinion, the space for gains seems limited as the late 2015 highs and the 38.2% Fibonacci retracement (based on the 2013-2016 downward moves) are very close to the current position of the ratio. As you see, this area was strong enough to stop increases in May and also in Oct, which suggests that we may see similar price action in very near future.

Additionally, this scenario is also supported by the very short-term picture.

From this perspective, we see that the oil-to-gold ratio climbed to the upper line of the blue rising trend channel, which in combination with the current position of the indicators (the RSI moved above the level of 70 and there are negative divergences between all indicators and the ratio) and decreasing volume during recent increases suggests that reversal and lower values of the ratio are just around the corner.

What does it mean for crude oil? Taking into account a strong positive correlation between the ratio and the commodity, we believe that lower prices of black gold are very likely in the coming week(s).

If this is the case and we see a correction of the recent rally, the initial downside target would be the previously-broken red line based on the Aug and Sep lows, the Nov 22 high of $49.20 or even the 50-day moving average.

Before summarizing today’s alert, we would also like to draw your attention to the relation between crude oil and silver.

From the weekly perspective, we see that the last week’s sharp increase approached the ratio not only to the upper line of the blue rising trend channel, but also to the 38.2% Fibonacci retracement which suggests that the space for further rally may be limited and reversal in the coming week(s) should not surprise us – especially when we take into account the very short-term picture.

As you see from this perspective, although the ratio increased slightly above the May peak and the upper line of the blue rising trend channel, this improvement was very temporary and we noticed a pullback, which invalidated previous tiny breakouts (the first negative development). Additionally, the size of volume increased during recent sessions, which suggests that bulls may lose strength in near future. Another disturbing factor is negative divergence between all indicators and the ratio, which increases the likehood of reversal. If we see such price action, the price of crude oil should also move lower as (similarly to what we wrote in the case of oil-to-gold ratio) a positive correlation between the ratio and light crude is still in cards.

Naturally, what’s bearish for the oil-to-metals ratios is bearish also for crude oil (it could have some short-term bullish implications for the precious metals market as well), which confirms our earlier observations regarding the black gold itself.

Summing up, the outlook for the crude oil appears to be bearish and its links with gold and silver appear to confirm it.  It appears that the profits from our short position in crude oil will increase further before this trade is over.

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 positions (with a stop-loss order at $54.51 and initial downside target at $45.43) are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.

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.


© 2005-2019 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