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Tuesday, July 15, 2014

WTI and Brent Crude Oil charts: bull markets face strong bear attacks

WTI Crude chart

WTI Crude_Jul1414

In the previous post on the 6 months daily bar chart pattern of WTI Crude oil, oil’s price was consolidating in the resistance zone between 105-108. The following cautionary remark was made: “Failure to breach the 108 level may enthuse bears to become active.”

The consolidation was expected to continue a bit, and it did so for the next 6 sessions. Once the 105 level was breached convincingly on the down side on Jul 2, oil’s price dropped like a stone below its 200 day EMA, before pulling back to the long-term average.

What caused the sudden fall in price? Was it because Iraq’s main oilfields were safe from the ISIS rebels? Or, did Libyan supply flood the market to cause a supply/demand mismatch? Or, was it just profit booking after a technical resistance zone proved too tough a hurdle for bulls?

It doesn’t really matter. Daily technical indicators had reached overbought zones, and that is often a precursor to a correction. Now, the technical indicators are looking oversold – which could lead to a bounce up in price.

On longer term weekly chart (not shown), oil’s price is seeking support from its 50 week EMA and is trading well above its rising 200 week EMA in a long-term bull market. However, weekly technical indicators are looking a bit bearish. That could lead to some more correction or consolidation.

Brent Crude chart


In the previous post on the 6 months daily bar chart pattern of Brent Crude oil, overbought technical indicators had pointed to a correction. Oil’s price was expected to drop to 112. But the bear attack was much more severe.

Oil’s price dropped nearly 10 points down to the 106 level – well below its 200 day EMA in bear territory. All three daily technical indicators are inside their oversold zones and showing negative divergences by falling below their respective lows touched at the beginning of April while oil’s price touched a higher low.

On longer term weekly chart (not shown), oil’s price has dropped below its 20 week and 50 week EMAs but is trading above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish. Some more correction or consolidation is likely.

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