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Tuesday, September 18, 2012

WTI and Brent Crude Oil charts: an update

WTI Crude chart

WTI Crude_Sep1812

In a post two weeks back about the 6 months daily bar chart pattern of WTI Crude Oil, technical indicators were bullish, but the following observation was made: “Only a convincing move above the 101 level will put the bulls back in control.”

Oil’s intra-day price almost touched the 101 mark, before retreating – providing another example of how a previous bottom can act as a resistance to future up moves. Note that multiple bottoms near 101 were touched back in Apr ‘12.

How strong will the resistance at 101 be? Note that the sharp break below the 101 level in early May ‘12 was accompanied by a volume spike. Such volume action means that it may require some effort by bulls to overcome the resistance.

All three technical indicators are bullish, but showing negative divergences by touching lower tops while oil’s price rose higher. Volumes on the previous two down days have been higher than those on the up days. The 50 day EMA is yet to cross above the 200 day EMA. The entire rally from the Jun ‘12 low has the characteristics of a bear market rally.

Brent Crude chart

BrentCrude_Sep1812_weekly

The long-term bull market on the 2 years weekly closing chart of Brent Crude oil remains intact. The 20 week EMA has just crossed above the 50 week EMA, and both are well above the rising 200 week EMA.

However, the sharp rally from the bottom of Jun ‘12 was accompanied by falling volumes and no meaningful correction. The on-going correction, if it continues for a while, will improve the technical health of the chart.

Technical indicators are bullish, but showing signs of turning down. An upward bounce from 110 will provide a buying opportunity. A drop below 110 will be bearish.

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