Sunday, January 10, 2016

CL Crude Oil COT (Commitments of Traders) and WTIC Oil Daily Chart Oversold Falling Wedge Positive Divergence Price Extended to Downside Lower Band Violation

The oil COT (Commitments of Futures Traders) chart is consistent with a bottom at hand for black gold. On the COT chart, the red circles show where tops occur for oil prices and the green lines show where the bottoms occur. What do you think will happen? The COT data lags by a few days so a recovery move in oil may be directly at hand. Considering that everybody and his brother are short oil, even Harry the cab driver, a short-covering rally may launch oil like a rocket.

The daily candlestick chart shows the following bullish indications. All indicators are set up with positive divergence (green lines) wanting price to bounce. The falling white wedge pattern is bullish. The RSI and stochastics are oversold which hints that a bounce is near. Price is below the 20-day MA below the 50-day MA below the 200-day MA extended to the downside so a mean reversion higher is needed. The pink standard deviation bands squeezed in tight which shot price lower last week but the lower band is violated so a move back up to the middle band, the 20-day MA at 36.10 and falling, at a minimum, is now in play.

Oil is ready to launch higher but will it? The charts say yes the only thing that can divert this rally is if a news event occurs like the Saudi's planning to increase production or other such news that would punch prices in the face. Even so, barring any additional news noise after that, the same technical anaylsis above will hold and oil will simply begin rallying a couple days from now. Keystone opened a long position in UCO late last week and will add if it falls. UCO is a 2x long oil ETF and USO is a safer 1x long oil play. The expectation is that oil recovers this week with a hefty rally. For more information on oil, reference the previous USO 2-hour and other oil daily and weekly charts. 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.

Note: The COT chart is courtesy of COT Price Charts a very useful web site and annotated by Keystone.

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