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Daily Oil Prices 4 Oct 2010

wti oil chart

WTI Oil Chart 4 Oct 2010

The WTI daily oil prices contract surged higher once again on Friday ending as a wide spread up candle which closed marginally below the $81.78 price and made it the third consecutive day of strong gains for crude oil.  The breakout was triggered on Wednesday by the better than expected oil inventory data which ended with a technical breach of the pennant formation which we outlined in our oil market commentary of last week.  As we forecast at the time any breakout from the pennant would be associated with strong momentum given the period of time that oil period had been consolidating in this region, and also the increasingly tightening of the price range on a daily basis.  Without wishing to sound smug we did forecast a break to the upside based on the upwards sloping line of the underside of the pennant formation which is always a good signal of which side the break is likely to occur.  In simple terms if the higher level of the pennant remains flat and the lower level is increasing in a series of higher lows then expect a breach to the upside and vice versa in the reverse scenario.  The break and hold above the 200 day moving average on Wednesday was significant as it signalled the change in sentiment and was duly validated strongly on both Thursday and Friday.  For oil trading this week we now need to see a break and hold above the high of late July at $82.97 per barrel which will then provide a further platform of support as the rally gains strength and develops into a longer term trend for daily oil prices in the short to medium term.  The bullish momentum should be confirmed later today on the daily oil chart once we see the 9 day moving average cross the 200 day giving us a bull cross signal and should the 14 day average follow suit then this will complete the short term positive sentiment for oil.

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