Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Have Oil Bulls Already Lost Their Power?

Published 01/09/2018, 01:21 AM
Updated 05/14/2017, 06:45 AM

On Friday, oil bulls pushed crude oil only 14 cents above the opening price, which showed their weakness. As a result, their opponents came back and took control, taking the price of black gold below $61.50. Thanks to these circumstances, light crude lost 0.92%, but is this the end of declines?

Technical Picture of Crude Oil

WTIC Daily Chart

In our last Oil Trading Alert, we wrote the following:

(…) On Thursday, crude oil increased to $62.21, but then pulled back, creating a doji candlestick. This means that the buyers' and sellers' forces leveled out during yesterday's session, which suggests that reversal may be just around the corner – especially when we factor in the proximity to the 2015 highs, which continue to block the way to the north.

Earlier today, crude oil futures extended losses and remain below $61.50 (at the moment of writing these words), which suggests that the price of black gold will likely follow them after the market open – similarly to what we saw many times in the past.

From today’s point of view, we see that the situation developed in line with the above scenario and crude oil declined after an “increase” to the daily peak of $62.04 (only 14 cents above the opening price). This show of oil bulls’ weakness encouraged their opponents to act, which resulted in further deterioration and a drop below the black dashed line. In this way black gold invalidated the earlier breakout, which suggests that we may see further declines in the coming week.

This scenario is also reinforced by clearly visible bearish divergences between the commodity and all daily indicators marked on the above chart. Additionally, the RSI and the Stochastic Oscillator generated the sell signals (while the CCI is very close to doing the same in the very near future), increasing the probability of lower prices of light crude.

How Low Could Black Gold Go?

In our opinion, the first downside target will be around $60.15, where the previously-broken upper border of the black rising trend channel currently is. However, if this support is broken, a test of the November highs will be more likely than not (around $58.99-$59.05) in the following days.

Summing up, crude oil invalidated the earlier breakout above the black dashed line, but still remans above the upper border of the black rising trend channel. Nevertheless, bearish divergences between the price and indicators together with the sell signals suggest that further deterioration may be just around the corner.

Latest comments

Crude broke above 2015 highs. Fundamentals are bullish. Can't trade on technicals alone. Oil up over 100% since 2016 lows. How do we still have so many bearish calls out there on oil still 2 years after the bottom and over 100% gain? The bulls have had the power since February 2016 and still do.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.