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

Relationship between Crude Oil Price and Oil Stocks

Commodities / Oil Companies Nov 22, 2017 - 12:46 PM GMT

By: Nadia_Simmons

Commodities

Although verification of the last week breakdown under important resistance line pushed black gold under $56, oil bulls didn’t give up and triggered a pullback. What does it mean for light crude? Will the relationship between crude oil and oil stocks give us more clues about future moves?


Crude Oil’s Technical Picture

Before we try to answer these questions, let’s examine the technical picture of crude oil (charts courtesy of http://stockcharts.com).

Looking at the weekly chart, we see that the overall situation in the medium term hasn’t changed much as crude oil is still trading in a narrow range around the upper border of the red gap created in 2015. Nevertheless, the current position of the indicators (the sell signal generated by the Stochastic Oscillator and one of the highest readings of the RSI and the CCI since the beginning of the year) continues to favor oil bears.

Having said the above, let’s examine the very short-term chart and find out what we can infer from it.

From the daily perspective, we see that Friday’s verification of the earlier breakdown under the upper border of the black rising trend channel encouraged oil bears to act yesterday. Although their opponents tried to push the commodity higher after the market’s open, they failed, which resulted in a drop below $56.

Despite this deterioration, the proximity to the green support zone attracted oil bulls and triggered a rebound – quite similar to what we already saw on Tuesday. Nevertheless, yesterday’s move wasn’t enough to push the price of light crude above the black resistance line, which means that as long as there is no invalidation of the breakdown below it, lower values of black gold are more likely than not – especially when we factor in the situation in the oil-to-gold and oil-to-stock market ratios (we wrote more about them on Wednesday and Friday).

Continuing to examine the relationship between crude oil and other elements of the market, we decided to take a closer look at the oil-to-oil stocks ratio.

Crude Oil – Oil Stocks Link

Looking at the long-term chart, we see that although the ratio extended gains in November, it is still trading under a very important resistance zone created by the upper border of the green rising wedge, the 50-week moving average and the 38.2% Fibonacci retracement.

This area is also reinforced by the red gap marked on the weekly chart below.

As you see on the above chart, the red gap continues to keep gains in check since 2015. Although the bulls pushed the ratio to this area many times in the past, all their attempts to go north failed, which translated into declines in the following weeks. We saw such price action in June, August 2015, in May, June, October 2016, in February, March, April, May and August 2017.

What happened with crude oil at the same time? In all the above-mentioned cases we noticed declines in light crude, which confirms that there is a positive correlation between the ratio and black gold (similarly to what we wrote in the case of the oil-to-gold and oil-to-stocks ratios). Therefore, in our opinion, if the oil-to-oil stocks ratio reverses and declines in the very near future, we will also see lower prices of crude oil in the following days.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Oil Trading Alerts as well as Gold & Silver Trading Alerts. Sign up now.

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