Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Who Knows What Will Black Gold Do in Coming Week?

Commodities / Crude Oil Dec 18, 2017 - 03:38 PM GMT

By: Nadia_Simmons

Commodities

On Thursday, crude oil moved a bit higher as oil investors turned their attention to the North Sea supply disruption. Although the price of black gold increased, the technical picture of the commodity doesn’t bode well for oil bulls. Why? We invite you to check our Oil Trading Alert. Have a nice read.

Yesterday, crude oil came back above $57 as oil investors focused on the Forties pipeline, which carries North Sea oil to Britain. Nevertheless, we should keep in mind that the above-mentioned disruptions will physically mostly affect the North Sea region. In other words, we think that the shale drilling and the last week increase in the U.S. production (which approached the output levels of top producers - Russia and Saudi Arabia) are more important for the price of light crude. Therefore, in our opinion, it is worth waiting for today's Baker Hughes report before we get excited about yesterday's increase and its “bullish” implications. Having said that, let’s examine the technical picture of crude oil (charts courtesy of http://stockcharts.com).


Crude Oil’s Technical Picture

Looking at the daily chart, we see that crude oil approached December lows, which encouraged oil bulls to act. As a result, black gold rebounded slightly, but did this “increase” change anything in the short term?

In our opinion, it didn’t and there are several reasons for this assumption. Firstly, light crude remains in the blue declining trend channel, which means that as long as there is no breakout above the upper border of the formation, another bigger move to the upside is not likely to be seen.

Secondly, the commodity is trading below the upper line of the black rising trend channel, which means that the verification of the earlier breakdown and its negative impact on the price are still in effect.

Thirdly, the bearish engulfing pattern continues to block the way to higher prices, which doesn’t bode well for oil bulls. As a reminder, how can we interpret this candlestick formation from the psychological point of view? Those traders, who had long positions decided to close them after an increase to the upper line of the trend channel, which resulted in a decline. Those who joined the last part of the upward move didn’t withstand the pressure and began to close their positions in fear of losses, which caused that the price of crude oil continued to fall.

Therefore, in our opinion, the bearish engulfing pattern is an additional signal for investors to open even more short positions, which due to the absence of the opposite side (the previous ones who closed their positions due to fear of losses will not re-open them in the same direction) will push the price even lower in the coming week.

Fourthly, the size of volume, which accompanied yesterday’s increase was visibly lower than what we saw during recent declines, which increases the probability that oil bulls may not be as strong as their opponents. At this point, it is worth noting that many times in the past similar differences in the size of volume were the first signs of declines.

Fifthly, the sell signals generated by the daily indicators remain in cards, supporting further deterioration in the coming week.

Are there any other negative signs, which could encourage oil bears to act in the coming week? Ooh yes, they are. Let’s take a closer look at the weekly chart below.

From the broader perspective, we see that although crude oil rebounded at the beginning of the week, black gold pulled back, which resulted in a comeback under the 200-week moving average. Nevertheless, this negative sign will turn into bearish if light crude closes today’s session below $57.84.

But returning to the negative signals, please keep in mind that the sell signals generated by all weekly indicators also supports oil bears and lower prices of light crude in the coming week.

On top of that, when we focus on the above chart, we can notice one more negative fact – a similarity to what we saw in June 2015. Back then, crude oil also remained in the consolidation for several weeks (marked with blue). What’s interesting, these were similar levels to those, which we observe on the charts now (the November peak was in the middle of the 2015 consolidation). What happened after that?

As you see on the weekly chart, the breakdown below the lower line of the formation preceded not only the red gap, but also a significant decline in the following weeks. Will we see a similar price action later this month?

Taking into account two very important additional resistances (the upper border of the green rising trend channel and the 200-week moving average), the above-mentioned sell signals (we also saw them in 2015) and the short-term picture of the commodity, the bearish scenario is much more likely for us than the price increase above the level of $60.

Such negative development (for oil bulls, not for us who already have profitable short positions) is also justified and more likely when we consider the long-term perspective. Let's analyze together the monthly chart below.

Looking at the above chart, we see that crude oil is trading not only below the upper border of the trend channel, but also under the very important red zone (created by the 2015 peaks), which remains the major resistance since mid-2015. As you see, this area is also reinforced by the 50-month moving average and the 38.2% Fibonacci retracement based on the entire 2011-2016 downward move.

What does it mean for crude oil and the bulls? In our opinion, as long as there is in breakout above this key resistance zone, the way to higher prices is blocked. In other words, a reversal and bigger move to the downside is just around the corner.

So, how low could crude oil fall first? In our opinion, if light crude extends losses from current levels, we’ll see (at least) a drop to around $54.81-$55.24, where the January peak, the mid-November lows and the lower border of the very short-term blue declining trend channel are. If this support area is broken, the way to lever levels will be open.

Summing up, short positions continue to be justified from the risk/reward perspective as crude oil remains under the upper line of the black rising trend channel, the upper line of the blue declining trend channel (seen on the daily chart), the 200-week moving average and the key resistance zone marked on the monthly chart. Additionally, the sell signals generated by the weekly and daily indicators together with the bearish fundamental factors increase the probability of further declines in the coming week(s).

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.

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