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Tuesday, December 31, 2013

WTI and Brent Crude Oil charts: an update

WTI Crude chart

WTI Crude_Dec3013

In a post 3 weeks back, the daily bar chart pattern of WTI Crude oil had rallied sharply from its Nov ‘13 low of 92 but was facing resistance from its 200 day EMA. That led to the conclusion that the rally was over and any further attempt to move up would attract bear selling.

Oil’s price rose briefly above its 200 day EMA, but faced resistance from the 99 level and dropped below its 200 day and 50 day EMAs to 96. So far, chart movements were as per expectations. But bulls had other plans.

The rising 20 day EMA provided good support. Oil’s price bounced up once more and continued to rally past its 200 day EMA and the 100 level before correcting a bit. Is this a pullback to the 200 day EMA that provides a buying opportunity?

It may appear so. The 20 day EMA has crossed above the 50 day EMA, and both EMAs are moving up towards the 200 day EMA. Daily technical indicators are in bullish zones, though their upward movements have stalled. Oil’s price is trading above all three EMAs.

However, there are a couple of bearish signs. Volumes have receded significantly as oil’s price continued its rally above its 200 day EMA. More importantly, the entire trade during Dec ‘13 appears to be within a ‘rising wedge’ pattern, from which a downward break down may have started already.

Technical analysis is not a science. Price patterns don’t always play out as expected. But a bearish ‘rising wedge’ is almost invariably followed by a correction. Oil’s price may return to bear territory below its 200 day EMA once again.

Brent Crude chart

Brent Crude_Dec3013

The 6 months daily bar chart pattern of Brent Crude oil expectedly dropped below its 200 day EMA – as mentioned in the previous post. However, before oil’s price could fall further, bulls regrouped and charged back into bull territory.

The 113 level has provided strong resistance since Sep ‘13. Oil’s price retreated after testing but failing to overcome the 113 level. The rally was not supported by good volumes. Oil’s price has been trading in a sideways band between 103 and 113 for the past 6 months – except for a brief upward breach in late Aug-early Sep ‘13.

Daily technical indicators are in bullish zones. MACD is positive and above its signal line. RSI is above its 50% level. Slow stochastic is inside its overbought zone. However, all three indicators have started to fall.

Another fall below the 200 day EMA is likely.

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