Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Crude Oil: It’s Here!

Commodities / Crude Oil May 25, 2018 - 03:02 PM GMT

By: Nadia_Simmons

Commodities

In the previous alerts we let you know how the situation in the crude oil was becoming increasingly bearish, but that it was not yet bearish enough to justify any action regarding the price. The risk was still too high to do so, and we explained that waiting for the confirmation was the preferable course of action. The confirmation has arrived.


Let's take a closer look at the charts below (charts courtesy of http://stockcharts.com).

On the above chart we see that the price of crude oil has recently reached an important, long-term resistance area that we had marked with the green area in the previous analyses. It’s based on two important resistance levels. The first is the 50% Fibonacci retracement based on the 2011-2016 downward move and the second one is the 38.2% Fibonacci retracement based on the entire 2008-2016 decline.

Since the above-mentioned resistance levels were breached temporarily and both breakouts were invalidated (crude oil is below the 50% retracement at the moment of writing these words), the implications for the following weeks appear bearish. The confirmations that we meant previously, come mostly from the short-term charts though.

Crude oil was trading within the blue rising wedge and the red rising resistance line based on the previous highs and we previously wrote that without a major breakout above or below it, the outlook would not change significantly.

The confirmation and key sign that we saw yesterday was the above-mentioned breakdown. The important thing is that crude oil has not only broken below the rising wedge, but it has also broken below the upper border of the rising trend channel.

The move – and two previous daily declines – took place on volume that was higher than what we had seen in the previous days, which supports the bearish case.

The additional bearish signs come from the CCI and Stochastic indicators (both of which flashed sell signals) and the final – perhaps most important – confirmation comes from the triangle-apex-based reversal (we marked the triangle and the reversal date with grey dashed lines) that pointed to the final top of the decline. Knowing that we had seen one makes the current downswing much more believable.

Also, in our yesterday’s analysis, we pointed out that we had seen a decline in crude oil for two days in a row for the first time in almost 2 months. Now we have three days of subsequent declines. Something is definitely different about the market and since it was previously rallying without a bigger decline, it seems even more likely that we have one right now.

Finally, looking at the weekly candlesticks also points to a possible (!) bearish signal. We would like to emphasize that we are aware that no pattern is really useful before it is completed and while this is definitely the case with price formations like head and shoulders, as far as weekly candlesticks are concerned, we might already have some insight. The reason is that while a breakout or breakdown below a certain formation is critical as it demonstrates the strength of the market and without it, there are virtually no implications, the same doesn’t apply to candlesticks – at least not in the same way.

At this time 80% of this week’s trading is over and we know that crude oil moved $0.45 lower in today’s overnight trading. We also know that the volume is almost as high as last week even though we have volume data from only 4 trading days. This gives us good probability that the price of black gold will not end the week above $71.4 and if it closes below it, we will have a quite clear bearish reversal weekly candlestick that will likely be confirmed by significant volume. So, while the weekly reversal was not yet complete, we have a good chance of it being complete, so the implications are already somewhat bearish. Naturally, a somewhat bearish sign is not enough to justify changing the outlook on its own, but in this case it’s only something that confirms other - much clearer - signs.

Again, it doesn’t work in the same way with formations as whether the breakout is in or not is critical, and before it is seen, the formation could have entirely different implications than after it.

Summing up, based on the long-term resistance levels, short-term breakdowns and additional confirmations from other signals, the outlook for the price of crude oil is now bearish.

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.


© 2005-2019 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