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Tuesday, January 10, 2017

WTI and Brent Crude Oil charts: correcting after touching 52 week highs

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil broke out upwards from its trading range between 52 and 54 on the first day of trading in the New Year.

Oil's price crossed above the 55 level intra-day, but succumbed to selling pressure and dropped to seek support from its rising 20 day EMA. In the process, a 'reversal day' bar (that often marks an intermediate top) got formed.

After a brief upward bounce past the 54 level, oil's price corrected sharply below its 20 day EMA and closed just below 52. Concerns over rising US output and Iraqi exports may have contributed to the bearishness.

All three daily technical indicators showed negative divergences by touching lower tops when oil's price touched a new 52 week high. 

MACD has crossed below its signal line and corrected from its overbought zone. Note that the signal line has formed a 'rounding top' reversal pattern. The last time it formed such a pattern was in Oct '16 - when oil's price dropped from 52 to 42.

RSI and Slow stochastic are showing downward momentum and are about to enter bearish zones. Higher volumes on recent down days is another bearish sign.

On longer term weekly chart (not shown), oil's price is trading above its rising 20 week and 50 week EMAs, but below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but not showing any upward momentum.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil crossed above the 58 level intra-day on the first trading day of the New Year but dropped to close near 55. A large 'reversal day' bar (higher high, lower close) got formed in the process.

After bouncing up to the 57.50 level on Jan 6, oil's price corrected sharply below its 20 day EMA and closed just below 55. Negative divergences visible on all three daily technical indicators, which touched lower tops when oil's price touched a new 52 week high, may have triggered the correction.

MACD has crossed below its signal line and has corrected down from its overbought zone. RSI and Slow stochastic are showing downward momentum and seeking support from their respective 50% levels.

Stronger volumes on recent down days is a clear sign that bears are becoming active. Despite OPEC production cut, another year of low oil prices is likely.

On longer term weekly chart (not shown), oil's price is trading above its 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but not showing any upward momentum.

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