Oil is a big focus as the new week of trading begins after the Easter holiday. Traders are nursing hangovers from cheap booze. Chocolate bunnies, jelly beans, Peeps, hard-boiled eggs and beer are sloshing around in investor's bellies creating a queasy start to the week. S&P futures are off -8 about 3 hours before the opening bell for the regular Monday trading session.
The Trump Administration plans to eliminate waivers on the Iranian oil supplies. In other words, President Trump is tightening the sanctions on Iran (tightening the screws against the rogue nation that supports terrorism in the Middle East). On one hand, Trump is pressuring OPEC to keep the oil flowing freely to keep prices low to aid the US economy (lower gasoline prices) but on the other hand is limiting the oil supplies out of both Iran and Venezuela two of the world's key producers. American's are noticing that gasoline is back above $3 per gallon, a 3-handle. It took $80 to fill Keystone's pick-up truck the other day.
The president does not want nations to take Iranian or Venezuelan oil, however, many transfers continue taking place between tankers on the high seas. Trump pressures OPEC, controlled by Saudi Arabia, to keep the oil taps open but the Kingdom is keen on protecting their own interests. The Saudi's need a high oil price since that increases their revenues so they can support the population keeping the huddled masses at bay. The world's oil market grows more complicated daily.
Key news that has not been publicized enough by the media is Libya. The nation is in civil war again and oil supplies will be impacted. President Trump is now singing a different tune supporting the rogue general that is marching on Tripoli. Trump is extremely concerned about the oil market as evidenced by the change in policy over the weekend. The US will back any actors, good or bad, if it keeps the oil flowing, especially out of Libya. That is what it is all about; money and greed.
So currently, oil production is limited in Iran, Venezuela and Libya. West Texas Intermediate Crude (WTIC) oil is up +2.4% to 65.51 (green dot) this morning the highest since November. Brent oil is above 74 bucks.
The weekly oil candlestick chart above shows how price violated the upper band so the middle band at 62.22, and rising, is on the table. You will have to look at the chart today to see if the spike higher in crude on the Iran and Libya news creates neggie d. It is likely that it will as shown by the thin red lines. However, oil is trading on emotion and news making it a tough nut to crack. Look at the news this morning that spikes oil +3%. Short sellers are getting their pants pulled down and are given wedgies to begin their week. Oil bulls were hesitant to play the long side and they miss the pop.
Note the ADX showing a very strong down trend playing out in Q4 (purple box) but the long upside rally in oil this year is not a strong trend higher. The light blue lines show an inverted H&S pattern playing out with the head at 42.5 and neckline at 53.0. That is a difference of 10.5 so the target is 63.5 when price broke up through the neckline, which was achieved satisfying the H&S pattern.
The light grey lines also show an inverted H&S pattern with head at 42.5 and neckline at 55.5 so that is a difference of 13.0. So price should target 68.5 if the 55.5 neckline was taken out, which it was. Price is at 65.51 as this is typed so that target would be another 3 bucks. The upper standard deviation band is at 66.17 so there is a couple of upside targets here if the news continues that limits oil supplies.
Many charts are exhibiting ominous red rising wedges. The collapses from rising wedges can be quite dramatic. As the world worries about the oil supply-side, perhaps they should actually be more concerned about the demand-side in the weeks and months ahead. Keystone is not playing in the oil arena these days. If a direction had to be chosen the preference would be to play oil short going 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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