Crude Oil: Stand Aside

Technicals | Nov 28 2018

Bottom Line 27/11/18

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: [USD/bbl] 39.58 / 37.20 (new contract)
Resistance Levels: 81.49 / 97.78

Technical Discussion

After a 'Black Friday' last week when Crude Oil prices plummeted, we had some gains last night that have partially offset some of those losses. A surge in supplies has been the catalyst for the recent negativity, combined with a slowdown in demand growth. And this overhang is expected to remain into early next year as a minimum. It will be interesting to see if a production cut by OPEC after their meeting on December 6th has any positive effect on prices. The Greenback has also been overall robust and this has had an added effect of weakening Oil prices as well combined with the potential risk to economic global growth due to the ongoing trade wars between the U.S and China. Not a bull to be seen at the moment.

Reasons to be negative below 54.00:  
→ supply / demand equation has recently turned negative
→ price action continuing to be productive bigger picture yet recent weakness strong
→ the potential for a major low to be locked in is now very real
→ Geopolitical factors in relation to Trade Wars / Saudi Arabia remain a concern

We are checking in on the monthly chart tonight to cut out some noise and to get a bigger picture perspective on things. Crude Oil prices have been hammered since out last review with price dropping dramatically throughout October and November off the 77.53 highs. Note that the Wave-4 of a lesser degree rejected of 81.49 so this mini milestone was important to be broken above to get some bullish confidence back, yet it wasn't to be. Our analysis for sometime has been looking at a major low point locking in at 37.20.

The 5-wave move lower for the Wave-(C) was text book as was the double bottom retest back in June 2017. The pattern then triggered with its target easily achieved. Yet since October all this solid technical effort has all but failed with price having retraced to 50.10 thus far and still looking week. The move south has also been strongly impulsive which is a big negative with the double bottom breakout retest circa 57.00 – 54.00 also failing to hold. So all the heavy lifting over the past couple of years will be for nothing if buyers cannot return, and almost immediately from here. A triple bottom establishing with price heading back to sub 40.00 wont be a good look. The bears are back in control !

Trading Strategy

This is not the time to get involved from a trading perspective, especially with downside motive dominating and some technical lines in the sand failing to bring out buyers. Price is well oversold though on both the dailies and the weeklies so its due for a bounce. Yet we will just have to wait and see as the strength of this downside move over the past couple of months is going to take a fair amount of time to recover from. If and when that recovery process does finally start to take shape at all. Stand aside for now.  

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