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Tuesday, March 12, 2013

WTI and Brent Crude Oil charts: in bear territory

WTI Crude chart

WTI Crude_Mar1213

Two weeks back, the 6 months daily bar chart pattern of WTI Crude Oil was trying to seek support from its 200 day EMA. But bearish daily technical indicators led to the conclusion that the correction was likely to continue.

As expected, oil’s price could not hold on to its long-term moving average for long, and dropped into bear territory. After a couple of intra-day drops below the 90 level, a weak pullback towards the 200 day EMA is in progress.

Why weak? Take a look at the volume bars, which are reducing in size as oil’s price gets closer to the 200 day EMA. All three EMAs are beginning to converge. The likely outcome is resistance to the up move from one of the three EMAs and a resumption of the down move.

Daily technical indicators have corrected oversold conditions, but remain bearish. MACD is turning up towards its falling signal line in negative territory. RSI has bounced up from the edge of its oversold zone, but remains below its 50% level. Slow stochastic has emerged from its oversold zone.

The ‘death cross’ (of the 50 day EMA below the 200 day EMA) will technically confirm a bear market. Bulls will try to prevent that. Bears are likely to use the bounce to sell.

Brent Crude chart

Brent Crude_Mar1213

Two weeks back, the 6 months daily bar chart pattern of Brent Crude Oil had bounced up from the support from its 50 day EMA. But negative divergences in RSI and slow stochastic led to the following conclusion: “A test of support from the 200 day EMA is a possibility.”

The 200 day EMA failed to provide more than a day’s support, as oil’s price dropped below the 110 level. A brief upward bounce above the long-term moving average gave another opportunity to the bears. Oil’s price fell to a lower intra-day low of 109.

Daily technical indicators are bearish, but looking oversold. RSI and slow stochastic are showing positive divergences by touching slightly higher bottoms. Any attempt at a rally by bulls may encourage the bears to sell more.

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