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Tuesday, December 10, 2013

WTI and Brent Crude Oil charts: bull rallies end

WTI Crude chart

WTI Crude_Dec0913

The 6 months daily bar chart pattern of WTI Crude oil fell briefly below the 92 level intra-day in end Nov ‘13. Just when it looked like the bears were in total control, oil’s price staged a smart rally on strong volumes to climb above its 20 day and 50 day EMAs. But the falling 200 day EMA provided strong resistance. By the end of trade on Dec 9 ‘13, oil’s price closed below its 50 day EMA.

What caused the sharp rally? Technically, all three indicators showed positive divergences by touching higher bottoms, while oil’s price dropped below 92 to touch a 6 months low. Also, the MACD signal line was forming a bullish saucer-like rounding bottom pattern – mentioned in the previous update.

Fundamentally, the improving US economic data may have encouraged the bulls to fight back. Whatever the reasons, it was a typical bear market rally – sharp and swift – that took every one by surprise. Unless oil’s price moves convincingly above its 200 day EMA and the 99 level, bears will have little to worry about.

Daily technical indicators are looking bullish, but showing diminishing upward momentum. MACD has just managed to enter positive zone. RSI is above its 50% level, but turning down. Slow stochastic is beginning to correct overbought condition.

The rally is likely to be a selling opportunity for bears.

Brent Crude chart

BrentCrude_Dec091213

The 6 months daily bar chart pattern of Brent Crude oil continued its rally past the 112 level. The possibility was mentioned in the previous update. But after reaching 113, oil’s price formed a ‘reversal day’ pattern that ended the month-long rally. After dropping to 109, oil’s price is seeking support from its 50 day EMA.

Unlike WTI Crude oil, Brent Crude oil is technically in a bull market as it is trading above its 200 day EMA. But it has been struggling to stay above its long-term moving average for the past 3 months. High volumes on down days is another concern for bulls. Don’t count the bears out just yet.

Daily technical indicators are still in bullish zones, but looking bearish. MACD is positive, but is about to cross below its signal line. RSI has slipped below its 50% level. Slow stochastic formed a small head-and-shoulders reversal pattern before dropping from its overbought zone.

Oil’s price is likely to drop below its 200 day EMA once again.

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