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TECHNICAL UPDATE (II): US Oil (WTI) – The air above $90 proves thin…

Updated Dec 21, 2012 4:30:00 PM By Chris Tevere, CMT

Fears about the United States going over the fiscal cliff appears to have stolen the limelight from geopolitical concerns in the Middle East of late. With the Euro area already in a recession, the fiscal cliff carries even more weight as a failure to reach an agreement could send the largest economy in the world into a decline as well. Consequently, this could have dramatic ramifications for crude oil demand heading into 2013. Additionally, with U.S. oil production reaching its highest levels in well over a decade; combined with this potential economic slowdown, it may continue to be a major headwind for oil prices.

Technically, U.S. Oil ran into still resistance between $90.30/75:

  • Channel resistance
  • Daily 144 & 169 EMA’s
  • 100-day sma
  • 38.2% retracement

Furthermore, this was also coincided by daily RSI’s failure into the key 60/65 level as well as a bearish engulfing candlestick – both bearish/reversal characteristics. Accordingly, U.S. Oil (WTI) could see another push lower towards channel support ($85.70/75) initially ahead of the November lows ($84.00/10) next. As a reminder, Elliot Wave analysis implies this is an overall wave-5 down and since RSI tends to lead price then trendline support from drawn from the October low warrants our attention over the coming days. Should this give way, keep an eye on the 78.6% retracement (using the June low & Sept. high) around $82.25/30, ahead of the psychological/option related $80 level next.

*WTI is a product not offered to US clients.

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE (I): US Oil (WTI) – Keeping a close eye on $87 
Updated Nov 27, 2012 5:30:00 PM

A little over a month has gone by and US Oil (WTI) still finds itself in a bearish state. While crude saw a few spikes due to another escalation of tensions in the Middle East, this time predominately in the Gaza strip, and super storm Sandy’s devastating blow to the northeast of the United States, it still did not shake oil’s overall outlook. At the end of the day, this is a case of over supply here in the U.S. (predominately due to improvements in drilling efficiency which has led to gains in production rates) and flat-to-declining demand driven by poor global growth (GDP) – Consequently, this scenario does not bode well for crude bulls.

Technically, the outlook does not look much better:

  • Daily RSI remains below the noted 60/65 level – Implies underlying weakness
  • Elliot Wave analysis suggests this is wave-5 down while $101 remains intact  
  • Still below key $91.00/60 level, which sees the daily 144 & 169 EMA’s & 100-day sma
  • Daily Ichimoku Cloud still resides above (not shown)

Presently, US Oil is trading just above the key $86.90/87.25 area – Sees the convergence of the 13-day sma as well as the daily Tenkan & Kijun lines. Should crude break below the support zone then it would not come as a major surprise to see another test of the November low near $84.10 initially, and potentially even make a move towards the psychological/option related $80 level thereafter.

*WTI is a product not offered to US clients.

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE: US Oil (WTI) – Another failure above $93…Is sub-90 next?
Updated Oct 19, 2012 5:45:00 PM

While geopolitical concerns in the Middle East have increased of late, namely the tensions between Turkey and Syria, which could potentially lead to supply disruptions – We ultimately believe cooler heads will prevail. Furthermore, our global growth concerns are finally beginning to filter through to the market and slowing growth should continue to undermine demand. On the supply side, production in North America looks set to pick up over the next few months. When combined (slowing demand & increased supply), it should have a downward impact on price through the end of the year and beginning of Q1 2013.

A few weeks ago I highlighted the technical under-performance of US Oil – See TECHNICAL UPDATE:

  • Elliot Wave analysis suggests it just completed wave-4 up – Invalidation Level $100.75
  • Failed into the 78.6% retracement around $100.30
  • Saw a daily RSI Bearish Divergence into the Sept. 14th high
  • This was coincided by a Bearish Engulfing candlestick

So what has crude done since then? Not much, but today’s price action suggests a break lower may be imminent:

  • Failed numerous times into the daily 144 & 169 EMA’s between $93.15/75
  • Broke below the daily Ichimoku Cloud around $92.00
  • Closed below the 13-day sma for the first time since 10/9
  • Daily RSI remains well below the key 60/65 level – Suggestive of an overall downtrend
  • Today’s daily move formed a Bearish Engulfing candlestick

Should it break below the 100-day sma around $90.05 next week, then a test of the October low near $87.75 is likely to follow shortly thereafter. As a reminder, as long as $100.75 remains intact then Elliot Wave analysis proposes this is wave-5 down (suggests a test the June lows near $77.35)

WTI is a product not offered to US clients.

Chart Source: Forex Charts by eSignal

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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