Technicals | Dec 03 2014
Bottom Line 02/12/14
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 69.28 / 62.79 / 58.01
Resistance Levels: 69.28 / 75.59 / 80.09 / 84.08
Technical Discussion
'Our last review wasn't that long ago and we mentioned that Crude Oil prices had not closed a month out lower than 70.00 USD since 1999. So the seriousness of such a breakdown cannot be overstated.' With a glut of Crude in the market place being flagged for sometime now, yet with OPEC being unmoved and producers continuing to pump it out like there is no tomorrow, its probably no surprise to see [the West Texas Intermediate] price finally succumbing and breaking below the critical 69.28 post GFC lows set back in 2009. In fact last night's volatile session tagged 63.72 before staging a major intraday reversal, closing out the session at 69.00. Plenty of other beaten down commodities also staged some remarkable recoveries last night yet it is way too early to gauge whether longer term follow through to the upside is going to be forthcoming. We will certainly be reviewing a few more commodity markets this week to see if we can start piecing together any evidence on whether the dogs of 2014 are going to become the darlings of 2015 ! Our small market cap. resource sector here in Australia could certainly do with a long over due boost.
Reasons to remain neutral (bearish below 69.00 – 70.00) :
→ surplus conditions globally continue to weigh on price
→ global geopolitical unrest remains yet is having little effect on price
→ watching potential recent fakeout move below 69.28
We are looking at the weekly chart tonight which shows the significance of the past couple of weeks. Particularly the last two trading sessions saw price break strongly below the 2009 lows at 69.28, which surprisingly showed little in the way of resistance. Yet we we witnessed price trading even lower last night before recovering bullishly to close out the session almost on its highs. Both sessions clocked up massive volume. The first full of sellers and last night full of buyers. Stops would have definitely been triggered by the die hards once the 2009 lows were broken, so this would have naturally created a frenzy for the exit gates. Last night though, the multi year high volume returned, yet this time buyers dominated. It certainly looks solid and bodes well for major lows locking in right here, or at least in this general region. More evidence is required though before we can be confident that the worst is behind us. A push back back above 69.28 that sticks will be positive, with a move beyond 80.00 even more compelling. The potential for a major downside fake out to have transpired over the past couple days of trading is certainly very real, and these frequently have bullish outcomes moving forward. An important market that we will continue to monitor very closely.
Trading Strategy
In between reviews we recommended an aggressive play on Crude Oil leaning on the support line and some bullish divergence on the dailies. Yet it wasn't enough to provide trade success and now it looks as though we may have been just a couple of days early with our trade timing. The markets can certainly test our resolve sometimes. We like what we saw last night yet its too early to get involved again just yet. Put it on the watch list.
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