Crude oil prices bounced back in style last week with Wednesday’s wide spread up candle injecting some much needed optimism which was duly consolidated on Friday with a hold above all 4 moving averages once again. Indeed a feature of Friday’s candle was the deep shadow to the lower body which tested support at the 9 day moving average suggesting that bullish intent remained firm and moreover this has converted into strong gains for the commodity in the oil trading session today with crude oil trading at time of writing over $1.63 per barrel higher, at $85.63. The key point to note from a technical perspective is that we are now once again trading above all four moving average and provided this continues to remain the pattern, then expect to see crude oil retest the high of 3 weeks ago at $88.62 per barrel. The 200 day moving average continues to slope higher suggesting that the longer term outlook for oil remains bullish and indeed our medium term target for the commodity continues to be $100 per barrel.
Crude oil prices closed lower last week ending the week and the oil trading session as a relatively narrow spread down candle which found solid support from the 9 week moving average, suggesting a possible platform of support in the technical area. Despite the negative sentiment last week the longer term technical picture remains firmly bullish for oil prices, particularly following the breakout and wide spread up candle of three weeks ago, which lifted the commodity away from the consolidation area of the last 9 months where oil prices had been bouncing between $70 and $80 per barrel for some considerable time. The key level, moving forward, is now a break and hold above the $90 per barrel region, which we should see in due course, and once achieved should then clear the way for an extended bull run for crude oil towards $100 per barrel and beyond in the next six months.
The WTI daily oil price blasted through the minor resistance at the .97 price point ending the oil trading session as a relatively wide spread up candle but with wicks to the top and bottom signifying a somewhat volatile trading session which saw oil prices react to the build in the crude oil inventories. Despite this, however, the strong bullish trend of the past few days remains firmly in place and having broken above this key resistance level the technical picture is now set for a strong move higher to develop over the next few weeks. The breakout was triggered last week from the pennant formation created throughout August and much of September, and since then we have seen a surge higher with strong support from the short term moving averages, in particular the 9 and 14 day. Both of these have now crossed the 200 day, once again giving us a strong bullish signal, and with the 40 day now beginning to turn higher this is adding further to the positive tone. This positive momentum has continued in both overnight and early trading, with daily oil prices trading higher once at $83.71 per barrel at time of writing. Our next target for crude oil is now the high of April 2010 which saw the commodity touch $87.13 which now represents a further area of potential resistance. Should this fail to hold then the WTI oil contract will have a relatively clear run towards the $89.60 last achieved in late 2008.
As forecast in Tuesday’s daily oil prices commentary the pennant pattern which had been forming on the WTI oil chart over the past few weeks, duly delivered the spectacular breakout we expected, with crude oil closing yesterday at fractionally below per barrel. The wide spread candle thus created breached a series of technical levels but, most importantly, held above the 200 day moving average at the close of yesterday’s oil trading session. This bullish momentum has extended into today’s WTI trading session with daily oil prices moving firmly higher once again, up almost $2 per barrel on the day to trade at time of writing at $79.92 per barrel and adding a further validation of yesterday’s breakout. The next logical target for crude oil is now the high of early August at $82.97 per barrel which marks the upper boundary of the wider trading channel of the past few months and should the current momentum be sufficient to breach this level, as expected, then this will provide an extremely solid platform for the commodity to develop a longer term bull trend where we see oil prices climb to the three figure mark once again and beyond.
Yesterday’s long legged doji candle on the daily WTI oil chart hinted at a possible pause point and potential reversal for crude oil, but so far in early trading this morning this has failed to materialise with the commodity drifting lower once again to trade at time of writing at .13 per barrel, having opened the oil trading session at .96 per barrel. As such the WTI contract continues to trade below all four moving averages once again but continues within the pennant formation and provided the lower level of this is not breached in the .50 then this would suggest that the consolidation remains firmly in place with an anticipated breakout in due course. However, until this pattern is completed and a breakout established daily oil prices on the WTI will remain waterlogged but with a bearish tone in the short term.
Overall the WTI closed yesterday’s session at $$74.96 per barrel following a build in the Cushing crude oil inventories which surprised the market which had been expected a draw of at least 1.5m barrels. In addition a market report due for release shortly in the US, suggests that refinery production is now at its lowest level for 5 months adding further weight to the market’s view that demand for crude oil is currently falling.