Tuesday, October 9, 2012

WTI and Brent Crude Oil charts: in corrective modes

WTI Crude chart

WTI Crude_Oct0812

In the previous post three weeks ago, the following three points were mentioned about the 6 months daily bar chart pattern of WTI Crude oil:

  1. The 101 level was likely to be a strong resistance
  2. All three technical indicators showed negative divergences
  3. Volumes on down days were higher than those on up days

The three points taken together led to the following conclusion: “The entire rally from the Jun ‘12 low has the characteristics of a bear market rally.”

Put another feather in the cap of technical analysis, which can be quite prophetic some times. Note that crude oil’s price retreated sharply after almost touching the 101 level, and dropped quickly below all three EMAs. The 50 day EMA failed to cross above the 200 day EMA. All three EMAs are moving down, with crude oil’s price trading below them. The bears are back on top.

The zone between 88 and 92 is a support/resistance zone, and WTI Crude’s price is trying to consolidate within that zone. If oil’s price can bounce up from the 88 level and move past 101, a bullish pattern of higher bottoms and higher tops will get formed. But it is a big ‘if’. The fall below the 200 day EMA was accompanied by a sharp volume spike. That means the 200 day EMA is likely to provide strong resistance to future up moves. Down-day volumes continue to be higher than up-day volumes. Bears are in no mood to relent.

Daily technical indicators are bearish, but showing some signs of turning around. MACD is falling below its signal line in negative territory, but downward momentum is slowing. RSI bounced up from the edge of its oversold zone, but is sliding down again. Slow stochastic also bounced up from the edge of its oversold zone, but is well below its 50% level. Any upward move is likely to face resistance from the falling 20 day and 50 day EMAs.

Brent Crude chart


The long-term bull market is still intact on the 2 years weekly closing chart pattern of Brent Crude oil. Though there were a couple of daily closes below the support/resistance level of 110, weekly closes have been above 110.

The 20 week EMA has managed to stay above the 50 week EMA, and both are well above the rising 200 week EMA. However, weekly volumes have been higher on down-weeks of late. That means the bears are lurking round the corner. There is a possibility of Brent Crude’s price dropping below the 110 level.

Weekly technical indicators are bullish, but showing signs of weakness. MACD is barely positive and above its signal line, but moving sideways. RSI has been hovering just above the 50% level for the past 3 weeks. Slow stochastic has dropped down from its overbought zone. Expect some more consolidation around current levels.

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