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Tuesday, June 5, 2012

Crude oil chart pattern: WTI and Brent

WTI Crude chart


WTI Crude oil price dropped like a stone during May ‘12, accompanied by high volume spikes on down days. A probable sign of smart money getting out. The ‘death cross’ of the 50 day EMA below the 200 day EMA has confirmed a bear market. A drop below the Aug ‘11 low of 76 will form a bearish pattern of lower tops and lower bottoms.

All three technical indicators are looking bearish and oversold. MACD is falling below its signal line in negative territory. Both RSI and slow stochastic are deep inside their oversold zones. WTI Crude price has fallen too far below its 20 day and 200 day EMAs.

A technical bounce can be expected, and appears to have started already. Such a bounce will correct oversold conditions, and can be used as a selling opportunity. As long as oil’s price doesn’t fall below 76, bulls may have some hope left.

Brent Crude chart


In the previous update on Brent Crude’s price chart pattern, the following comments were made: “All eyes should be glued to the 98 level – the previous low touched in Aug ‘11 and Oct ‘11. If crude oil’s price falls below 98, it will technically confirm a double-top reversal pattern, which is very bearish and a trend changer. The downward target of the double-top is 68 – the low touched back in May ‘10.”

Brent Crude’s price touched a new intra-day low of 96, where it found support from the 200 week EMA (not shown in chart above) and bounced up a bit to close above the 98 level. Oversold technical indicators and a drop far below the 20 day and 200 day EMAs may cause a stronger upward bounce. Bears are likely to use the opportunity to sell.

‘Death cross’ of the 50 day EMA below the 200 day EMA has confirmed a bear market. A drop below 96 may cause a fall to the support zone between 80-90. Looks like ‘game over’ for the bulls.

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