Crude Oil: Stay Away

Technicals | Mar 11 2020

Nymex Light Crude Continuous Futures

Bottom Line 10/03/20

Nymex light crude (WTI) futures US$/bbl

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $30.00 / $25.00 / $20.00
Resistance Levels: $40.00 / $54.66 / $67.54 (new contract)

Technical Discussion

Reasons to be bearish below 40.00:
→ supply / demand equation remains in balance
→ price action has been impulsive to the downside so bearish
→ Oil price war between major country producers now in play

Since our last review a price war has erupted which witnessed Oil prices collapsing. The war broke out after major oil producing countries failed to reach an agreement to cut output to make up for lower demand related to the corona-virus. See below some comments from our last review:

On the flip side, a bearish break to the downside is naturally still possible which would put Crude Oil in a very precarious position indeed. So any push below $40.00 via a move that sticks will likely put our longer term bullish analysis well and truly to bed.

You may remember we checked in on the monthly chart last time, and from a longer term bullish perspective we were liking the larger sideways accumulation phase that appeared to be going on. With our views leaning towards a break to the upside eventually rather than to the downside. Yet last night, with a heads up being given via the previous night’s price bar, it gaped lower over $40.00 support, tagging $27.34 intraday before closing the session out at $31.13.

So we now can’t get even be remotely positive about Crude Oil until $40.00 old support (now acting as resistance) is able to be broken back above again. To finish off the review with something positive though, price did close well off lasts night’s lows on some ultra high volume, indicating some buyers did come in late. Plus there is also some slight Type-A bullish divergence now in play (see tonight’s video). Very unusual times on our global markets at the moment so we will keep an eye on it.

Trading Strategy

You’d be a brave (or foolish) trader to want to get involved here on either the short side or the long side. Basically price now needs to evolve over a period of time to provide a low risk set up, in either direction. One that will allow us an opportunity to profit off. Crude is such a big and important contract that affects so many stocks and markets across the globe. So even though it is momentarily off our radar from a trading perspective, we are always keeping a very close eye on it.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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