The daily bar chart pattern of WTI Crude oil briefly rallied past the resistance of its falling 20 day EMA and the 38 level on the first trading day of 2016 - only to form a 'reversal day' pattern (higher high, lower close).
Renewed bear onslaught dropped oil's price to a 12 year low below the 31 level intraday on Jan 11 '16. Strong volumes indicate total bear dominance.
Daily technical indicators are showing downward momentum and looking oversold. Note that MACD and Slow stochastic are showing positive divergences by touching higher bottoms while oil's price dropped lower.
A technical bounce is likely - but there is still no sign of a bottom formation. That means even lower levels are possible - specially if fears of slower offtake from China continue.
On longer term weekly chart (not shown), oil’s price is trading well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking oversold, but showing positive divergences by not falling lower than their Aug '15 lows.
Brent Crude chart
The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude oil: "The fall during the past 2 months has been quite sharp. A technical bounce is a possibility."
On Jan 4 '16 - the first trading day of the year - oil's price rallied briefly with good volume support to overcome resistances from the 38 level and its falling 20 day EMA.
Bears pounced immediately - using global worries about an economic slowdown in China as an excuse. Oil's price dropped to a 12 year low below the 32 level, and stayed there.
All three technical indicators are looking oversold and showing downward momentum - but also showing positive divergences by not falling below their Dec '15 lows.
Any technical bounce may induce more selling by bears. At some point, OPEC will be forced to cut back on production. Only then can oil's price reverse the prolonged downtrend.
On longer term weekly chart (not shown), oil's price is trading well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are inside their oversold zones and showing downward momentum.