Tuesday, August 7, 2012

WTI and Brent Crude Oil charts: bulls fight back strongly

WTI Crude chart

WTI Crude_Aug0712

In an update three weeks ago about WTI Crude Oil’s 6 months daily bar chart pattern, bullish technical indicators had suggested the possibility of the bear market rally continuing a bit longer. But sliding volumes raised questions about the rally’s sustainability.

It wasn’t a great surprise that the rally stalled just short of the falling 200 day EMA. Oil’s price dropped to its 50 day EMA, consolidated sideways for a few days before making another attempt to test and cross above the 200 day EMA. Will the bulls succeed this time?

Technical indicators are looking bullish. Both RSI and slow stochastic are above their 50% levels. MACD is positive and above its signal line. But there are signs of weakness in momentum. Note that oil’s price touched a slightly higher bottom on Thurs. Aug 2 ‘12, but all three technical indicators touched lower bottoms. Also, down day volumes are strong – which means bears are using every opportunity to sell.

The 20 day EMA has moved up to touch the 50 day EMA, but both remain below the 200 day EMA. Technically, WTI Crude Oil remains in a bear market. Even if oil’s price manages to cross above its 200 day EMA, it is likely to face renewed selling pressure.

Brent Crude chart


The following concluding remarks were made three week’s back about the 2 years weekly closing chart pattern of Brent Crude Oil: “Technically, Brent Crude oil is in a long-term bull market. Bulls may regain control if oil’s price can climb above its 50 week EMA. Bears are unlikely to yield ground without a fight.”

Note that oil’s price hesitated briefly near its 20 week EMA, before rising sharply to cross above its 50 week EMA. Are the bulls back in control? Yes, and no. Oil’s price is trading above all three EMAs and the 200 week EMA is rising. That means the long term bull market is intact.

But the cross above the 50 week EMA hasn’t been a convincing one yet. Also, the entire rally from the Jun ‘12 low has been accompanied by sliding volumes – which means the rally can stall at any time.

Technical indicators are looking bullish. RSI is just above its 50% level, but its upward momentum is not strong. MACD has crossed above its signal line, but is in negative territory. Slow stochastic has climbed smartly above its 50% level.

The current rally has retraced about 50% of oil’s fall from its Mar ‘12 double-top to its Jun ‘12 bottom. In the daily closing chart of Brent Crude Oil (not shown), negative divergences are visible in RSI and slow stochastic, which failed to rise higher with oil’s price. Beware of lurking bears.

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