Sunday, February 8, 2015

WTIC Weekly Chart Lower Band Violation Price Extended Oversold Positive Divergence

West Texas crude oil traded wildly up +10% one day, down -10% the next then, even intraday, another big+10% up. That is ridiculous. Investors and traders are tripping over each other throwing money at energy stocks everyone calling a bottom. Volume is robust as shown by the volume candlestick for last week.

The weekly chart is on their side with serious oversold conditions, a falling wedge pattern and positive divergence (green lines) so the launch move is expected. Price was extended far below the moving average lines requiring a mean reversion. The MACD line barely turned possie d and the MACD lines still have not crossed positively to confirm the upside as yet but that would be expected. For such momentum downward price will likely need to stabilize and digest the one-half year of negativity going forward.

The monthly chart continues to show a weak and bleak MACD line so in that longer term monthly time frame, oil price likely wants to come back down again at some point in the future, say a few months out. The weekly chart above is very encouraging although folks that enthusiastically bot oil and energy-related stocks may be disappointed in a slowdown of the move higher. The weekly chart shows important support/resistance at 66, 57-58, 53-56, 48-49, 46 and 44.

Oil should stabilize going forward, however, the monthly chart wanting another low will likely keep price in the lower part of the neighborhood for a while, perhaps a channel through 44-58 into summer time. If price moves up through 58 then 66 is likely. With the wild and large percentage swings last week, many are probably looking for a vertical recovery spike higher, but the resistance at 53-56, then 57-58 may slow the ascent.

The projection is a sideways move through 44-58 into summer time. If price moves above 58 then the range would expand to 44-66 into summer. The hint of further weakness on the monthly chart must be kept in mind. Oil may enjoy buoyancy in February and March but only to reweaken again. Interestingly, the consensus expects a strong recovery in oil from here on out as evidenced by the strong buying but instead price may float through the sideways channels listed and then actually roll over again in late spring, summer or into Fall. This would be in concert with a deflationary theme that would have gathered momentum as the year plays out. The economic data was very encouraging late last week, however, creating optimism that the disinflationary and deflationary funk may subside. The jury is out on this conclusion. The ECB QE easy money creates optimism since the global central bankers want to keep pumping stock prices higher rewarding the wealthy (that own stocks). 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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