Friday, June 13, 2014

WTIC Crude Oil Daily Chart Ascending Triangle Rising Wedge Upper Band Violation

West Texas Intermediate Crude (WTIC) leaps from the 101.50 low to above 107 overnight a gain of nearly +6% in only six days due to the Iraq tumoil. Oil is increasing at a pace of +1% per day. The ISIS (Islamic State of Iraq in Syria) extremists control one-third of Iraq and are moving south to Baghdad. Three-fourths of Iraq's oil production is in the south so each mile south the ISIS militants move will send oil price higher due to the threats on supply. It is breathtaking to see the deterioration of Iraq occur so quickly, in days, reversing the US and Allies war effort over the last decade.

Price breaks up and out of the green ascending triangle yesterday. The vertical sides point to a gain of 6 to 9 bucks above the break out line at 104.5-ish which yields a target at 110-115. Price pierces the pink standard deviation lines, however, showing a drastically overbot condition and price will need to at least retrace to the middle band, the 20-day MA at 103.38, and rising, to catch its breath. Interestingly, the 103.00-103.50 area is the lower trend line of the ascending triangle and a logical support test area. The 20-day MA is rising quickly and will be at the triangle break out line at 104-105 in a couple days so the back kiss may occur at the 104-105 S/R level.

The red lines show negative divergence in place for the indicators but the price breakout may create new highs for these indicators moving forward. In the very short term, the green lines show long and strong behavior for the RSI and MACD line wanting to see higher highs in price after any pull back occurs. The WTIC weekly chart shows similar indicators; a mixed bag which points more towards sideways movement than anything. WTIC may move through 103-108 for the days and couple weeks forward. Of course, if ISIS rolls in to Baghdad and moves further south taking over the oil fields, price will imediately leap to the 110-115 triangle target identified above.

The volume is robust for the thrust higher yesterday but note that the selling volume from mid-April in the 102-104 zone remains stronger. It would be prudent for price to test the 103-104 level to see where the true conviction is. The projection is sideways with an upward bias. A short play is undesirable since the green lines want another price high and the Iraqi violence can easily catapult oil higher in a heartbeat. Perhaps after a few days of consolidation at 106-108 as Iraq unfolds, price may move down to back test the 103-105 area as discussed above. At that point price will likely pivot strongly higher, or strongly lower, but a projection cannot be made until we get into next week. Americans are going to get hit at the gasoline pump just as the summer driving season begins. The higher gasoline prices will hurt retail sales. Oil prices will move in lock-step with the ISIS aggression. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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