Technicals | Sep 15 2016
Bottom Line 14/09/16
Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Neutral
Support Levels: 41.79 / 39.10 / 34.04
Resistance Levels: 49.36 / 53.62 / 59.81 / 62.89
Technical Discussion
Some mixed fundamental data around at the moment be it for the most part it leans more on the negative side than the positive. Last night the International Energy Agency (IEA) issued a sombre report stating that Oil markets will continue to remain oversupplied even well into 2017. It predominantly cited a slow down in demand from the Asian region. This contradicted earlier reports from the agency saying that in late 2016 there would be no surplus which would then act as a strong support mechanism for Oil prices to start rising again. Further reporting on stockpiles will be revealed this week and will likely have further influence on price action over the shorter term, depending on what the data reveals. OPEC is again meeting with non OPEC nations within the next couple of weeks, yet as with earlier meetings during the year, attempts to lower or freeze current production levels appear unlikely. Especially with major players Saudi Arabia and Iran digging their heels in. Lets take a look at the technicals.
Reasons to stay neutral:
→ surplus conditions globally continue to weigh on price
→ demand / supply potentially starting to balance
→ OPEC surplus intervention continues to be worked on
→ price action showing signs of recovery yet still very early days
Volume attributes aligned to price are quite interesting at the moment. Over the past week for the most part volume has been above average yet overall price has failed to make an impression in either direction. So the bears and the bulls are having a bit of a battle here to gain ascendancy and basis the longer term trend, the bears are likely to have the upper hand, at least until [WTI US$/bbl] 49.36 can be broken past and then 53.67. The standout pattern continues to be the larger reverse head and shoulders pattern which is bullish, yet the neckline is lowering quite strongly which tends to weaken it somewhat. These patterns perform far more reliably and breakout stronger and with greater conviction when the neckline is more horizontal. The official breakout is above 53.67. What we do not want to see here though is the right shoulder starting to become complex, and from a time perspective, become drawn out. If this occurs then the pattern will likely fail. Anything below 43.00 will be problematic, then below 39.88 sets the scene for a double bottom circa 34.00 to come into play. There is still a tonne of work that price has to do here to prove it is ready to start making a recovery.
Trading Strategy
Basis the larger pattern structures we now have a recommendation on the long side in place. So buy at 49.37 with stops TBA. As we've talked about in our review tonight though, price is clearly under pressure right here even though over the past week or so there has been an element of buyer presence that has kept us interested. The main pattern could be stronger in structure as mentioned, with the downward sloping neckline not ideal, yet it still has validity regardless. Trading the larger Crude Oil contract is for experienced traders only, yet if it does break to the upside eventually, there will be plenty of opportunities to also trade energy related ASX stocks over the coming months. It is essential though that the larger structures we are tracking continue to hold strong, yet right at this juncture there are no guarantees.
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