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Tuesday, February 11, 2014

WTI and Brent Crude Oil charts: bull rallies fizzling out?

WTI Crude chart

WTI Crude_Feb1014

The 6 months daily bar chart pattern of WTI Crude oil used its rising 20 day EMA as a good support and rallied above its 200 day EMA to the 100 level in bull territory. Just when it looked all set to cross past its Dec ‘13 top of 101, bears probably decided enough was enough.

Daily technical indicators are bullish but looking overbought. MACD is rising above its signal line in positive territory, and seems ready to enter its overbought zone. RSI is a little below its overbought zone. Slow stochastic is inside its overbought zone and showing negative divergence by touching a lower top.

Strong down day volumes is an indication that bears are in no mood to relent. Expect a pullback down to the 200 day EMA and a likely return to bear territory. The rally was fuelled by technically oversold conditions and a rise in demand due to freezing weather across USA. Normalcy and lower prices should return.

Brent Crude chart

BrentCrude_Feb1014

After languishing below its 200 day EMA since the beginning of the year, the 6 months daily bar chart pattern of Brent Crude oil made a desperate dash past its 200 day EMA into bull territory. Selling pressure saw a pullback down to the 200 day EMA.

The pullback may not be a buying opportunity for a couple of reasons: 1) the break out above the 200 day EMA on Fri. Feb 7 was accompanied by rising volumes, but not a significant increase in volumes; 2) technically, oil is in a bear market following the ‘death cross’ of the 50 day EMA below the 200 day EMA.

Daily technical indicators are looking bullish. MACD is rising above its signal line in negative zone, and appears ready to enter positive territory. RSI is above its 50% level, but turning down. Slow stochastic is climbing towards its overbought zone.

Some price consolidation is likely before bears can regain control. Slowing growth in China and emerging economies may lead to lower demand and lower prices.

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