Crude Oil Sinks, but it's really looking so bad?
You probably noted that Crude oil tanked 21 US$ in just 6 weeks. It sounds horrible, right?
But it’s really that bad? Well, price went 21 US$ down, so if you were long on Clc1 and you didn’t close the position very fast, it was probably a little damaging or even catastrophic for your trading account balance. I hope you were not in that uncomfortable position.
If you are an individual investor or a manufacturing company, holding some kind of energy exposure, you would certainly like to know how strong this current down move could be. Let me help you discover the real potential for the referred current CLc1 price decrease.
You also probably know that a picture worth a thousand words. So let me show you a couple of very interesting crude oil daily and weekly time frame snapshots.
Let’s point-out a few observations,
o We only see 5 daily bars/candles inside a pink bearish background, which means we don’t have an extended down momentum trend for now
o We don’t have the salmon color high momentum background (as it was shown on June-July 2017 at the lower-left part of the chart)
o 20 EMA (blue line) just crossed the 200 EMA down (red line) and it’s still above the 450 EMA; 200 EMA is just turning around and is still showing a very long term up-trending behavior; 450 EMA is just trying to become flat
o We only have the trend line support break-down (Oct 31 2018) as a recent bearish technical event. However, we have to concede that the 450 current retest event was a very potent one, but it’s still undefined.
o Crude Oil daily chart is only showing 4/5 bars below the 450 EMA, which also means that is not yet confirmed.
Let’s now analyze the weekly time frame, where we will also observe one of the most potent oil price down moves.
o This CLc1 weekly chart, where we applied our full price forecast visual system into, is showing a very clear current situation: we don’t have any bearish pink or salmon color background, which means we don’t have a catastrophic scenario for now. And we don’t see any recent highlighted magenta color bar/candle, which means we don’t have any kind of down momentum blast.
o Note how was the weekly situation between Sept 2014 and March 2015, when we had more than 60 US$ price deterioration. That was a catastrophic scenario.
o Current situation is a 200-450 EMA area weekly technical retest, which is bearish, but is not yet defined. It needs to be confirmed.
In short, are we ready to make the bear flag call?
No, I am not ready to make that call, not yet.
I want to see first the daily 450 EMA bear retest bearishly confirmed, with the 450 EMA down-trending.
Then I need to see both, salmon and the pink bearish backgrounds, simultaneously shown in daily time frame. And I would like to see highlighted daily bars also.
From the fundamental point of view, US$ strong dollar is highly accountable for the current extra bearish pressure on oil prices. But we have to also recognize the current oversupply expectation for 2019, as probably the most important bearish factor on crude oil prices.
Eduardo R. Gils
TradingVest President
& e-GlobalTrading Director
Visit e-globalTrading at AmericaPlast EXPO
