• 3 hours Markets Take Breather As Consolidation Continues
  • 5 hours Economic Woes Weigh On Copper Prices
  • 8 hours World's Largest IPO At Risk Following Drone Strikes
  • 24 hours Gold Is Beating Buffett’s Berkshire Hathaway
  • 1 day What’s Behind The Silver Sell-Off?
  • 1 day The Retail Apocalypse Is Accelerating
  • 1 day The Top Tech Stocks Of The Year
  • 2 days America’s Workforce Elderly Workforce To Double By 2028
  • 2 days Toyota Tests Solar-Powered Prius
  • 3 days Why The Gold Rally Flatlined
  • 3 days The Uranium Sector Can’t Catch A Break
  • 4 days Upcoming Fed Meeting Has Investors On Edge
  • 4 days Global Gold Sector Outlines Responsible Mining Principles
  • 5 days China’s Giant Vampire Fund Loses $120B
  • 5 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 5 days Savvy Investors Are Betting Big On This Little Data Company
  • 6 days How The Government Is Wasting Tax Money This Year
  • 6 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 6 days The World’s Biggest IPO Is Almost Here
  • 7 days The Relatively Of Money And Happiness
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Nadia Simmons

Nadia Simmons

Nadia is a private investor and trader, dealing in stocks, currencies, and commodities. Using her background in technical analysis, she spends countless hours identifying market…

Contact Author

Przemyslaw Radomski

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do…

Contact Author

  1. Home
  2. Markets
  3. Other

Oil Trading Alert: New Highs Ahead Us?

Oil Trading Alert originally published on Dec 5, 2016, 10:10 AM


 

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

On Friday, crude oil gained 1.21% as OPEC deal continued to support the price of the commodity. In this environment, light crude re-approached the Oct high. Will we see fresh 2016 peak in the coming week?

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

Crude Oil Daily Chart
Larger Image

On Friday, we wrote the following:

(...) With yesterday's increase light crude broke not only above the barrier of $50, but also the red resistance line (based on the Aug and Sep lows), which triggered further improvement and a rally above the upper border of the blue rising trend channel. Despite this move, the black resistance line (based on the Feb and Aug lows) in combination with the proximity to the Oct high encouraged oil bears to act, which resulted in a pullback and a daily closure below both resistance lines.

Such price action means that light crude invalidated the breakout above upper line of the blue trend channel and suggests a verification of the breakdown under the black resistance line which doesn't bode well for oil bulls. If this is the case, we may see a correction of recent rally and a drop to the previously-broken red line based on the Aug and Sep lows (currently around $50.15)

From today's point of view, we see that the situation developed in line with the above scenario and crude oil moved lower after the market's open, reaching our initial downside target. Despite this drop, the proximity to the barrier of $50 encouraged oil bulls to act, which resulted in a rebound and a comeback to the Thursday's high.

As you see, with Friday's increase, the commodity also moved above the previously-broken upper borer of the blue rising trend channel, invalidating earlier breakdown. Although this is a positive development, which suggests further improvement and a test of the Oct high, we should keep in mind that the medium-term black resistance line based on the Feb and Aug lows remains in play, keeping gains in check (as a reminder, as long as there is no daily closure above this line all upswings could be nothing more than a verification of earlier breakdown).

Additionally, this area is also reinforced by the long-term red resistance line (based on the previous peaks), which successfully stopped earlier rally in Oct.

Crude Oil Weekly Chart
Larger Image

On top of that, the size of volume that accompanied recent increases (since Wednesday) has steadily decreased, which suggests that the rally can go without steam and reversal in the coming days should not surprise us. 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.

Summing up, crude oil bounced off the previously-broken red rising line and re-approached the Oct high. Despite this move, the medium-term black resistance line based on the Feb and Aug lows and the long-term red resistance line based on the previous peaks continue to keep gains in check, which means that as long as there won't be a breakout above them further rally is not likely to be seen.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

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

Thank you.

 

Back to homepage

Leave a comment

Leave a comment