Crude Oil Technical Analysis

The price is located near 200-day SMA (200 SMA) and below 100-day SMA (100 SMA) on the border between the primary bullish and the ranging bearish trend on the chart within the following narrow support/resistance levels:

• 44.89 resistance level located near and above 200 SMA on the beginning of the bullish area of the chart, and
• 42.49 support level located below 200 SMA and above 100 SMA in the beginning of the ranging bearish area.

RSI indicator is estimating the secondary ranging market condition.

• If the price will break 44.89 resistance level so the bullish trend will be started.
• If price will break 42.49 support so the ranging bearish condition will be continuing.
• If not so the price will be ranging within the levels.

Resistance	Support
44.89	42.49
50.86	39.59
N/A	37.23

The Medium-Term Strategy: watch close price to break 44.89 resistance level on close daily bar for possible buy trade with 50.86 target. Alternateve - watch close H4 price to break 42.49 support level for possible sell trade with 39.59 and 37.23 targets

H4 price is on the secondary correction which was started today morning because of Doha talks fail: the price broke key support level to be stopped near 100 SMA/200 SMA reversal area and near above 39.92 support bearish reversal level. If this 39.92 level will be broken by the price to below on close bar so the intra-day bearish reversal will be started, otherwise - ranging bullish.

• If price will break 39.92 support so the intra-day bearish reversal will be started.
• If not so the price will be ranging within the levels.

Resistance	Support
44.01	39.92
44.92	37.24

• Recommendation to go short: watch the price to break 39.92 support level for possible sell trade
• Recommendation to go long: n/a
• Trading Summary: breakdown

SUMMARY : correction

TREND : waiting for reversal

The month of May doesn’t appear to be providing the bullish support for WTI Crude Oil that prior months have. At least, this hasn’t played out within the opening range or first week of trading in May. A strong US Dollar and weak global risk sentiment picture have caused concerns that the imbalance from supply, albeit contracting supply, and demand will remain unreasonably wide favoring lower price.

As markets await non-farm payrolls on Friday, a few news developments provided a strong bid in WTI & Brent Oil (CFD: USOil & UKOil Respectively). First, news of a devastating wildfire in Alberta’s Oil Sands Area in Canada has led to the evacuation of the entire population just under 100k. Naturally, output has disrupted reducing supply by an estimated 1m bpd+ according to data published in Alberta’s Spring Oil Sands Quarterly.

Additionally, developments in Libya and Iran have caught the attention of traders, and if nothing else, may provide enough fear to have short-sellers sit on the sideline until clarity reigns again. In Libya, escalating tensions may cause production output to fall by ~120k bpd if the National Oil Corporation (NOC), set up by the rival Eastern government, continues to block tankers.

Lastly, Iran has noted that they are quickly reaching pre-sanction levels in production and market share already. Those fearful of a supply glut are seeing this as positive for a potential coordinated supply balance sanction by OPEC members. This morning, the following headline flashed: "IRAN READY FOR JOINT ACTION W/ OPEC AFTER PRE-SANCTION MARKET SHARE".

The above chart is a medium-term price channel via Andrew’s Pitchfork tool with sliding parallels drawn with the slope of the median line off of key pivots. The lower handle is drawn off the February 11 low at 26.03. You’ll notice on the bottom-left of the chart; the sliding parallels have acted as key pivot support zones into Q2. Now that we have seen a break above the 200-DMA (currently near $40/bbl), our focus turns higher to the upper median line around $47.50.

The Support Zone in focus after Thursday’s blast-off is the Wednesday low at $43.20. Wednesday's low is above the next level of support by ~$0.70 barrel at $42.48, which is the April 26 low that printed before pushing up to $46.75 to close the month. Below $42.48, there could be a quick drop to the 200-DMA, which would take a strong move lower down to ~$40/bbl. Given the significance of the Intermarket factors that have shifted since Oil broke above $40/ 200-DMA, only a move below there would change my bullish model.

Given the macro environment, I’m staying bullish for now, and the April high is the next resistance level in focus at $46.75/bl. Beyond there, the Weekly R1 & R2 pivot at $46.77 & $49.35 respectively may soon be tested.

In addition to the technical focus around Andrew’s Pitchfork, the sliding parallels, and the Intermarket relationship of the US Dollar, we should keep an eye on retail sentiment, which could be warning of more upside price action.

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The US Dollar and Crude Oil are both higher on the day along with SPX500. Much of what happened on Tuesday appears to be fueled by a risk-on rally as even the European Stoxx 600 rose by the most in six weeks at 2.2% on ~110% of its average monthly volume.

On Wednesday, the EIA inventory data and Cushing Stock will be looked to confirm recent sentiment that there are large draws on current supplies that are aligning with disruptions of supply in Nigeria to further support price toward $50/bbl. Tomorrow’s EIA numbers are expected to come in at 2.25m bbl decline in crude stockpiles. Thankfully, the disruptions in Crude from the Canadian Wildfires don’t appear to be long-lasting as Canadian oil-sands facilities that workers evacuated last week due to wildfires are being allowed to prepare for the restart.

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WTI Crude Oil Price came within a whisper of the 2016 high on Tuesday after hitting $50.10 in mid-morning trading ahead of July Contract expiration. Regardless of recent force, the CL1 June contract has seen a May price range of ~14% (43.03-50.21) that may be slowing down but does not appear done.

After being the laughing stock of markets, Oil Bulls are looking at the longest run of gains in five years as they look to add another month to the streak of consecutive gains. While little is expected of the OPEC meeting this week, with some calling it a non-event, there is plenty to be on the watch for this week including the European Central Bank as well as the May Non-Farm Payroll release on Friday morning.

Additionally, escalations in Libya continue to hold Oil trader’s attention. However, larger risk-sentiment as seen via the SPX500 so far has continued to favor the view that the stock of supply as seen in the weekly API & EIA inventory data that is pushed back one day this week due to US Holiday’s on Monday will continue to show a draw due to increased demand.


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Crude Oil Daily: bullish trend to 6-month high at 53.95 as a target. The price is located above 100 SMA/200 SMA reversal area for the primary bullish market condition: price is breaking 51.51 resistance level to above for 6-month high at 53.95 as a nearest bullish target to re-enter.

If the price breaks 53.95 level to above so the bullish trend will be continuing with 55.54 possible target for breakout.
If the price breaks 44.60 support level to below so the reversal of the price movement to the ranging bearish condition will be started.
If not so the price will be moved within the channel for ranging bullish.

At a time when confidence was reemerging in the oil market as demand was picking up and a potential balance from oversupply in the first half of 2016, the Brexit vote likely came at the worst possible time. While desiring to avoid a melodramatic statement, producers began accelerating production with the assumption demand was picking back up aggressively and that the dollar was under control. However, with the recent break above 12,000 in the FXCM Dow Jones US dollar index and the breakdown in equities like the SPX 500 we could see a drop in risk sentiment that brings WTI Crude Oil (CFD: US Oil) lower as well.

There are three things that stand out on the Daily US Oil chart. First, the resistance around $50 from the October high. Second, the lower high into the Brexit vote that was met with a much stronger US dollar. Lastly, the pressure now being put on the 55-day moving average that has been a clear directional bias indicator for crude.

At the risk of oversimplification, if the US dollar begins to strengthen further, and WTI Crude Oil (CFD: US Oil) falls back below the 55-Day Moving Average (currently at $46.59 per barrel), we could likely see a retest of the March corrective zone. This zone occurred when US Dollar showed strength again that eventually faded. This zone sits at $41.85/$35.81 per barrel. A break below this zone would favor retest below $30 a barrel.

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We appear to be seeing a new wave of supply coming onto the market, and if demand cannot keep up (which the storage on Oil tankers argues it cannot), we could move lower. To explain how much lower, let’s move on to the charts.

Ichimoku Cloud is a trend following indicator that allows you to see the “big-picture trend” on the chart. If price (shown via candles), and the momentum line (bright green on my chart) are below the cloud, we are in a bearish environment. Buying against the momentum and trend is not advised because a downtrend tends to gather steam much like a snowball rolling down a mountain.

For now, we can use the bottom of the cloud, which aligns with the 100-DMA at $44.63/bbl as clear resistance. Until price breaks above this level on a closing basis, higher prices should be viewed as more favorable levels to enter a short position as opposed to “buying low.”
Significant support aligns at the 61.8% Fibonacci Retracement zone of the February-June zone, which is also the late-March low ~$35.81/bbl. While fighting a trend is not encouraged, that is a level to see if buyers begin to show up due to bargain prices.

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If the US Dollar weakness continues, it seems like this trend could just be getting started. For more definitive levels, let’s go to the charts.
Crude Oil Price Chart Rises Toward Well Identified Resistance at $49.25/bbl

After failing at the topchannel in June, the price quickly dropped down to a pre-identified zone provided by the median line and the Fibonacci Retracement levels in focus between $41.85-$35.22/bbl. Key support that would deflate the confidence of the 22%+ August trend would be a break below the higher-low of $41.27/bbl from August 11.

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The last week of Q3 has all focus on the OPEC and Russia meeting in Algiers. The Federal Reserve announcement did little for the US Dollar as many now see even the likelihood of one rate hike as a fading possibility. Now, Algiers may be a disappointment for Oil Bulls as the FOMC meeting on September 21 were to US Dollar Bulls as Iran has said they are not going to freeze output at the current level, and Saudi is not interested in freezing production alone.

While much focus is now on the outcome of the OPEC meeting in Algiers, and the following meeting in November where rumors will likely run rampant once again. However, on Tuesday, IEA came out with a warning that oversupply will exceed demand until late 2017. Traders will likely keep this warning in their back pocket and look for a possible failed-OPEC accord alongside DOE data on Wednesday to show a further build to increase further bearish bets on Oil.

Another development in institutional positioning has the aggressive bearish sentiment that has not been seen since September 2015. The bearish sentiment comes in the forms of Bearish Puts, which are purchased when traders want to sell higher than they believe the market will be in a set amount of time. Such bearish exposure could see the market test some key levels on the charts.

Currently, the price of Crude Oil is sitting in the middle of the August price range, which has engulfed September’s price action. Tuesday’s low was the 50% retracement of the range that spans from $49.10/bbl down to $39.22/bbl. The price support in focus now appears to be near the September low of $42.74/bbl, and if the price is unable to hold above that support, we will turn focus toward the daily price range of the August low from $40.84-$39.22/bbl. Such a breakdown would keep us patiently on the bearish side of the Oil market with a keen focus on fundamental stories.

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