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Tuesday, April 26, 2016

WTI and Brent Crude Oil charts: an update

WTI Crude Oil chart


The following remark was made in the previous post on the daily bar chart pattern of WTI Crude oil: "Even if oil's price crosses above its 200 day EMA, the strong resistance zone between 42-44 will be more difficult to overcome."

Oil's price did cross above its 200 day EMA on Apr 12, but wasn't supported by strong volumes. The next day it attempted to test resistance from the 44 level but fell short, and formed a 'reversal day' bar (higher high, lower close).

After plunging below its 200 day and 20 day EMAs, oil's price bounced up sharply and once again crossed above its 200 day EMA - this time backed by strong volumes that provided technical validity to the move into bull territory above its three EMAs.

Note that oil's price breached the 44 level intra-day, but has not managed to close above 44 so far. After forming another 'reversal day' bar on Apr 21, oil's price has pulled back towards its 200 day EMA.

Is the pullback a buying opportunity? The answer would be 'Yes' if oil was trading in a bull market. But technically, a bear market is still in force, and will remain so till the 'golden cross' of the 50 day EMA above the 200 day EMA.

All three technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with oil's price. Also, RSI and Slow stochastic are forming bearish 'double top' patterns. So, the odds of bears reasserting themselves are getting better by the day.

"Kuwait’s crude production is recovering after its recent workers’ strike and output from Iraq has been climbing," as per marketwatch.com. That may put downward pressure on oil's price. Morgan Stanley and Barclays also expressed bearish views.

On longer term weekly chart (not shown), oil’s price is facing strong resistance from its falling 50 week and is trading well below its 200 week EMA in a long-term bear market. The upward momentum of weekly technical indicators is weakening.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude oil shows a failed attempt at crossing the 200 day EMA, followed by a drop below the rising 20 day EMA.

A sharp increase in volumes propelled oil's price above its 200 day EMA on Apr 20 for the first time since the bear market began in Jul '14. The next day, oil's price touched 46 intra-day, but formed a 'reversal day' bar.

Combined negative divergences visible on all three technical indicators - which failed to touch new highs with oil's price - resulted in oil's price pulling back to the 200 day EMA.

'Double top' reversal patterns formed by RSI and Slow stochastic near their overbought zones hint at further correction in oil's price.

On longer term weekly chart (not shown), oil's price stopped short of testing resistance from its falling 50 week and is trading well below its 200 week EMA in a long-term bear market. Weekly technical indicators are looking bullish but showing signs of weakening upward momentum.

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