Technicals | Jan 21 2015
Bottom Line 20/01/15
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 45.00 / 39.00
Resistance Levels: 58.00 / 63.00 / 69.00
Technical Discussion
The price of Crude Oil [WTI] continues to be keenly watched. The oversupply issue has continued unabated into 2015 with the latest data out of Iraq revealing that record production here is now taking place. What is of interest though is whether low Oil prices are going to reverberate across other markets. Obviously high cost production Oil and Gas Companies are feeling the pinch with the pain extending to their suppliers if things become worse. And then there are the banks who may have financed these businesses calling in loans or suffering bad loan losses as balance sheets start to suffer. Some quarters are suggesting China will be big buyers and will start stock piling on mass at present levels. Yet yesterday Chinese regulators tightened control on margin lending and the effect was the Shanghai Composite Index being hit hard via 7.7% single day drop, taking out this years gains in one foul swoop. An over reaction perhaps yet sustained weaker stock prices in this part of the world will not be supportive Oil, so certainly another factor in the complicated equation that requires close monitoring !
Reasons to be bearish below 69.00 – 70.00 :
→ surplus conditions globally continue to weigh on price
→ global geopolitical unrest now subdued
→ OPEC continues to remain sidelined in regards to intervention
→ 45.00 then 39.00 support is now in the firing line
There has been some significant volume coming in and around the recent lows of 44.68 which aligns a line of support at 45.00. The next line if support right here doesn't hold is not until 39.00, so continuing very bearish if price cannot start to find a floor around present levels. The only saving grace may be some Type-A bullish divergence coming into play if price were to swing lower once more shorter term. Volume has increased over the past couple of weeks in an attempt to stop the bearish rout yet attempts to close back above 50.00 have to this point failed. Milestones needing to be achieved to relieve the negative pressures start with a close above 50.00. If price can then close out this month around 55.00 then this will produce a monthly price bar on high volume closing near its highs which will definitely be a positive. Key though are the old major support lines now acting as resistance circa 58.00 and 69.00 respectively, with suggestions of a turnaround only being forwarded above these important price points. Until then the path of least resistance continues to be lower !
Trading Strategy
Many are suggesting that Crude Oil has now entered a bear market and bear markets generally take years to recover from. The facts remains though that technically price has been in a bear market since the mid 2008 highs were locked into place. So for mine Crude Oil has been in a bear market for over six and half years ! In fact if time equality on this immediate move is to be studied vs the move lower off the 2008 highs, then a major low point could well be locked in within the next month or so if it hasn't been already. Something to keep in mind for punters looking to trade this market sector in the future.
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