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Tuesday, April 9, 2013

WTI and Brent Crude Oil charts: bears on a roll

WTI Crude chart

WTI Crude_Apr0913

The following comments, in a post analysing the 6 months bar chart pattern of WTI Crude Oil two weeks back, seem almost prophetic on hindsight: “Daily technical indicators are turning bullish, which means a test of the recent top at 98 is a possibility… However, note that RSI and slow stochastic are showing negative divergences by failing to reach higher tops with oil’s price. Strong volumes on down days is another bearish sign.” 

A few days after the previous post, oil’s price rose to test the 98 level, but formed a bearish ‘reversal day’ pattern (higher high, lower close) and collapsed in a heap. Despite dropping below its 200 day EMA three days in a row on intra-day basis, oil’s price hasn’t yet closed below the long-term moving average. But that may be a temporary respite.

Daily technical indicators are turning bearish. MACD has crossed below its signal line and falling towards its negative zone. RSI has slipped below its 50% level. Slow stochastic has fallen sharply below the 50% level from its overbought zone. Strong volumes on recent down days means the correction isn’t over yet.

Brent Crude chart

BrentCrude_Apr0913 

The 6 months daily bar chart pattern of Brent Crude Oil was looking quite bearish in a post two weeks ago, and the following concluding comments were made: “Bears have been using every rise to sell. Bulls will require special effort to prevent a ‘death cross’ of the 50 day EMA below the 200 day EMA.”

Bulls did try to engineer a rally that took oil’s price briefly past its 200 day EMA. But the effort wasn’t good enough. Bears pounced on the opportunity to sell, and pushed oil’s price down to its lowest level in 8 months. The ‘death cross’ has technically confirmed a return to a bear market.

Daily technical indicators are looking bearish to the point of being oversold. MACD has crossed below its signal line and poised to drop inside its oversold zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic is inside its oversold zone. Oil’s price may attempt to bounce up, but bears are likely to sell again. Strong volumes on down days indicate such a possibility.

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