Sunday, February 8, 2015

WTIC Crude Oil Daily Chart Sideways Channels

Oil launched nicely off the possie d (green lines). Interestingly, the oil chart had placed a nice bottom two weeks ago and since the positive divergence was universal across all indicators there was no reason for price to come back down again in this time frame but it did anyway and the positive divergence was even stronger so the big launch occurs last week. Price is extended under the moving averages and needed a mean reversion higher. Price violated the lower standard deviation band so a move back to the middle band, the 20-day MA at 47.53, was needed and price blew up through that and tagged the upper band at 52.07. The upper band violation now places a move lower to the middle band at 47.53 and rising on the table.

Last week, everyone and his bro is buying oil and oil-related stocks in a festive party atmosphere all proclaiming that the "bottom is in." Even the taxi driver said he placed his entire life savings into energy stocks last week. Price is now moving up into the apex of that red rising wedge, a bearish pattern, and the stochastics and money flow are negatively diverging. This will create softness in the oil price for a day or two but the long and strong RSI, MACD line and histogram want to see higher highs in oil price after any short pull back. The 53-58 zone is very strong resistance and price is stalling as it prepares to attack the resistance area.

The oil weekly chart is agreeable to many weeks of upside for price ahead; at least sideways action with an upward bias. The daily chart above shows that price may have a tough time moving through the 53-58 resistance on its first try in the days ahead. The 20-day MA (middle standard deviation band) at 48-ish on the downside remains in play. A move up through 58 will send price to 66.

The projection is for oil to move sideways with an upward bias for several days ahead trying to push up through 52-55 but price would be expected to stall and then come back down to 48-50 say about one week or two out. Then price will continue sideways to sideways higher to  honor the weekly chart so a move through 44-58 is a reasonable expectation for February, March, April and May. The monthly chart has a weak and bleak MACD line so this should pull price lower to retest the lows at 44-48 say, in the April to October period. Of course time will need to play out and there will be many events and whatnot affecting price so the progress can be studied and chart projections adjusted along the way.

In this short daily time frame, price needs to take a rest for a couple days but will print higher highs after that although the 53-58 resistance will likely keep price in check overall. After price tops in the days ahead a move down to 48-50 is expected perhaps late February early March then price will move higher again. If price moves above 58 then 66 is next but this may not be on tap until a couple months out or so. At this time, the expectation is that price remains under 58 going forward but if not, then under 66, and the 44-58 sideways channel, or 44-66 channel may be in place for the bulk of the year forward. 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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