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Daily Oil Prices For WTI Crude Oil – 17th April 2009

WTI Oil Prices - Crude Oil Prices Daily Chart 17th April 2009

Despite bearish fundamentals, including huge inventories of crude oil, and a rebound in the US dollar vs the euro, crude oil prices are proving remarkable resilient to this downward pressure, and so far have managed to remain in touch with the psychologically important $50 per barrel price level.   In the last few weeks there has been a close correlation between oil prices and equity markets, with the two following one another positively.  The rationale behind this relationship is generally considered to be based on the view that equity markets are considered a leading indicator of economic growth, and with the earnings news so far being marginally better than expected, this is helping to pull oil prices higher, or least preventing a fall.   However, from a technical perspective the picture is less than clear with yesterday’s price action being symptomatic of the oil market at present, ending the day in a very narrow trading range and with small wicks both top and bottom of the candle, indicative of a spinning top.  The high of the day failed to hold above the 9 and 14 day moving averages which are now superimposed, as we continue to grind towards a pennant formation in the short term, the point of the pennant settling around the $50 per barrel mark.

With daily oil prices now sandwiched between two groups of moving averages, and with the pennant pattern being formed, trading intraday is virtually impossible at present, unless and until we see a breakout, which will come in due course, and until it arrives I would suggest you take a wait and see approach to the oil market.  The only way to trade this particular chart formation is to use an option straddle strategy, and wait for the breakout to occur and I would suggest looking at 3 month options to provide plenty of time for the volatility required to arrive.  My longer term view is that we will see a break to the upside in due course, and for any sustained momentum we will need to see a retest of the resistance now in place in the $54 a barrel region.

The short and medium term trends are sideways, the long term trend is bullish.

WTI:

Support:    $51.61 (yesterday’s low)                              Resistance: $55.79 (high of 03/04/09)

Support:    $50.15 (low of 08/04/09)                              Resistance: $54.69 (high of 14/04/09)

Support:    $49.05 (low of 01/04/09)                              Resistance: $53.00 (yesterday’s high)

OIL (BRENT):

Support:    $52.53 (yesterday’s low)                              Resistance: $54.31 (high of 06/04/09)

Support:    $51.85 (low of 09/04/09)                              Resistance: $54.10 (high of 14/04/09)

Support:    $51.15 (low of 06/04/09)                              Resistance: $53.91 (yesterday’s high)