Are Crude Oil Bears Right Around The Corner?
Cyril Ndiga | Aug 05, 2017 09:36AM ET
Daily
U.S crude oil (WTI) has been on a relatively strong Downtrend since early March this Year. Over the past five months, it has consistently made lower highs and lower lows. It is now grossly overbought with a high that is lower than the previous high, on 25th May, as seen on the Daily chart.
Both the Relative Strength Index and the Stochastic Oscillator show exterme overbought conditions. Moreover, The Stochastic Oscillator and RSI are at the same overbought levels as they were on 17th April and 26 May this year, after which the more dominant trend,(The Downtrend) continued.
Over the past week, pressure has loomed over oil prices, which reached a high of 50.43 and then went down to end the week 0.3% lower, at 49.53. This may indicate that the bullish trend observed over the past few weeks is about to come to an end. Investors however at this point, seem to want to hold their positions instead of closing them. The prices may go down to around $45.00 before resuming the uptrend to reach about $51.00 at which it is likely to range for the rest of the year.
U.S crude oil prices settled lower this week by 0.3%. Prices were seen to rise on Friday after U.S NFP exceeded expectations. This was seen as good for crude oil demand and therefore led to the 1.1% gain seen on Friday. Despite this sharp gain, Oil was not able to beat its previous high before it reached its Overbought level according to both the RSI and Stochastic Oscillator. This may mean the price may retract to around $47 within the next week before it ranges between 47 to 50 during the month.
Since 1st August Oil is seen making lower highs at the same overbought conditions. This indicates that bull strength is fading slowly.
This would be a nice place for the medium-term conservative trader to go short, given the analysis I have given on the Daily and Hourly Charts.
Over the next week or two we are likely to see a dip in U.S crude oil Prices. Right now however, all eyes are on the OPEC Meeting scheduled for 7th and 8th this month in Abu Dhabi.
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As at this time the bulls are still in control but the bears are right around the corner.
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