Bears to Resume Dominating OIL Prices

Bears to Resume Dominating OIL Prices

By: James Ansher | Where To Trade | On:20-10-2014 07:07
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Key Highlights

  • Longer term Bearish sentiment persists
  • Fundamental Sentiment agree with technical analysis
  • Prices to Di lower in the Future
  • Long term trends In play

 

Oil

Since July, the Market has been lowering the price of oil consistently as the sellers are willing to accept less and less for their oil. Last week, we saw that there is a sound fundamental backing for the fall in oil prices; increased supply of oil has led to an increase in competition among producers and this has had a easing effect on oil prices.

We also saw that the future outlook for oil prices is expected to remain the same as it currently is (as long as the current situation persists). This means that lower oil prices will continue for the foreseeable future. The next potentially sentiment change for oil prices will be in November when OPEC members meet. Until then, we have a set direction for oil prices. We want to check whether the technical analysis of price movement agrees with this bearish fundamental bias.

 

Support and resistance levels

Last week the prices found significant support at the 80.00 level as speculative buyers clustered around the 80.00 major level. We have however found significant selling pressures and the prices are now drifting lower below last weeks close.

Oil prices primarily respect the major price figures; this means that our support and resistance levels will be dictated by the major levels. 

Major support levels are therefore

  • 80.00, 75.00 and 70.00

The nearest resistance levels are at

  • 85.00, 90.00 and 95.00

 

Technical analysis

Four hourly chart

From the four hourly chart, the 14 period moving average has been trading below the prices however it has now touched and made a bearish cross over the prices during the early London session. We are anticipating that after the current candle closes, the prices will be entirely below the moving average. This is an indication that the short term selling pressure will persist. It also signals that the previous price correction has ceased.

The stochastic indicates that we are at oversold conditions at a reading of 11.00. The RSI on the other hand indicates that we are at neutral conditions. Since these two signals contradict we will wait for the prices to give us confirmation. We can however conclude that the bears are gaining control of the prices basing on the moving average and the preceding bearish candles.

 

Where To Trade - US Oil H4 19-10-2014

 

Daily chart

From the daily chart, the 14 period moving average is trading well above the prices. This shows that on this timeframe the bearish momentum is still in play. We should therefore be looking for the prices to move even lower.

The Stochastic is giving a neutral reading at 49.51. This is a potential trend continuation signal indicating that the pricess are likely to keep at their current direction. The RSI indicates that we are at neutral conditions with a reading of 31.20 which matches up with both the moving average and the stochastic in this time frame.

 

Where To Trade - US Oil Daily 19-10-2014

 

Wrap up

The technical indicators show that the  bears are about to regain control of the prices in the short term, The market has however been bearish all along with the larger timeframe charts pointing to the bearishness of the prices. Under these conditions a great trading approach is to short the prices as soon as it breaks $1 below the 80.00 level.

James Ansher

James Ansher

When there is a will there is a trade

A successful Forex trader and expert advisor

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