Technicals | Jan 28 2016
Bottom Line 27/01/16
Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 30.00 / 25.00 / 20.00
Resistance Levels: 39.30 / 45.66 / 51.82 / 54.90
Technical Discussion
'SUPPLY SUPPLY SUPPLY ! And until it goes away price is going to remain heavily weighed with even lower levels still possible.' Well since our last review lower prices were achieved off those 11 year lows via another 20% drop down to 27.56 [West Texas Intermediate; USD]. Yet some demand has surfaced down at these battered down levels although whether it is going to be able to sustain is a completely different matter. Speculative buying when markets have been smashed is common place as bargain hunters enter the fray. Hints are coming into the market place as well that OPEC and non-OPEC producer may be coming closer to a deal to reduce output to ease the supply glut. Yet it all means for nothing unless price can back it all up via a more sustained move higher. Trade being opened up with Iran has bought with it expectations of even lower prices with more Oil coming into an already oversupplied market. Yet combine this with bearish sentiment now being at extremes, then this is where the smart money often starts showing interest via contrarian plays against the trend. Not saying this is happening now yet it is something worth keeping in the backs of our minds.
Reasons to stay bearish below 54.90:
→ surplus conditions globally continue to weigh on price
→ Iraq now adding to existing oversupply
→ OPEC surplus intervention has been limited to this point yet change could be near
The bears have completely mauled this market down to the fact that we were stating to use psychological round numbers to scratch around to find technical reason for price to be supported. In our last review it was 35.00 yet this was broken with 30.00 being the next important line in the sand. This was then broken below last week yet demand has finally surfaced down at these levels and interestingly via an solid increase in volume which is a definite long over due positive. Some Type-A bullish divergence sits in the wings if price attempts another swing lower so based on the immediate evidence to hand, there is certainly scope for a decent counter trend move to evolve from here as a minimum. Far too early to be calling for a major low just yet though. Back to neutral above 54.90.
Trading Strategy
'With support and bullish divergence lining up here, there is scope for a counter trend move to the upside to develop over the coming weeks.' As stated above we could finally be in the throes of this happening with the support zone 30.00 – 35.00 doing everything it can to hold. We dropped for a couple of days below the lower boundaries yet price has fought its way back into it. This is a big high risk contract yet there is enough evidence to offer up an early aggressive long trade recommendation for experienced traders only. So buy at 32.74 with stops below 29.25. For conservative traders please stand aside and await better confirmation.
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