Tuesday, December 13, 2011

Crude oil under triple digits in $WTIC remains bearish: technical charts

Crude oil's bounce today was impressive, but not enough to break this chart resistance - yet. It popped out of the gate this morning on news that Iran will hold drills to practice closing ths Strait of Hormuz. This in turn fuel speculation that oil supplies could be disrupted. Curiously, however, the west Texas contract that I use for charting ($WTIC) was not able to make a break above $100.

If you've been following my oil charts and related Fibonacci levels for crude oil, you know that right now, the $100 (up to $103) level in $WTIC is acting as a bull vs. bear line. Failing to get above it leaves open the spectre of a bear market in crude oil, based on having traced a Fibonacci .707 earlier this year when it hit almost $115, and now another .707 retrace (this time, back toward the almost-$115) when it tagged $103.
Indicators on my daily chart of $WTIC (courtesy of Stockcharts.com where I do my technical charting) confirm that oil has been working on an intermediate top. The push up today held them off from confirming a reversal to trend down, but it's only a pause for now. That goes along with the price remaining under the trendlines I drew, which go along with the Fibonacci resistance levels.

The $100 level is the Fibonacci 61.8% retrace back to that almost-$115 level in $WTIC, and also represends the pivot level around which it gyrated in a range earlier this year, before the big drop to $75. If $100 is the resistance level that turns crude oil back down again, then it can test even lower; say, around $65, and potentially lower over time. It could tag $65 and remain bullish for the longer term, since that would be about the 61.8% retrace to the 2009 low (i.e., a second-wave pullback). Of course, dropping to $65 would be perceived as bearish in the meantime.

That type of bearishness in crude oil would fit in with the deflationary ideas about long-term Kondratieff "winter" trough conditions during the few years ahead. I'm not going to make this a theoretical post about that, however. I'll just point out that on my monthly chart, below, you can see that price touched back up to a big channel midline, and the indicators are similarly hovering in tug-o'-war middle areas.

This is why, based on the daily and monthly chart views - I cannot consider crude oil to be bullish unless and until it can rise above these resistance levels. Right now, that means $100 in $WTIC.

No comments:

Post a Comment