Are Oil Prices On The Mend?
Blackwell Global | Jun 27, 2017 06:07AM ET
Key Points:
- Recent gains could be built on in the coming weeks.
- The shifting technical bias is indicating that gains could be quite substantial.
- A near-term peak is likely to be seen at the $47.69 handle.
Oil finally seems to have found a near-term bottom – much to the relief of OPEC – and this could set the commodity up for sizable recovery over the coming weeks. Of course, the overarching consensus that the cartel’s efforts will be overshadowed by North American supply remains in place, which will likely mean that we aren’t destined to move back above that $50 mark. Nevertheless, there could still be some decent upside potential to capitalize on.
Primarily, it is the shifting technical bias that suggests that recent gains may be only the beginning of a much larger upswing for oil prices. This may come as somewhat of a surprise to some as, quite clearly, the EMAs are about as bearish as they can be and the long-term trend line is certainly in decline. However, upon closer inspection, there are actually numerous signs that oil could be much more buoyant than is immediately apparent.
For one thing, the Parabolic SAR – typically a good indicator of trend direction – is barely one pip above price action. Effectively, this means that we could see the reading shift to bullish with even the most modest day of buying pressure.
Additionally, the MACD and the signal line are well on the way to converging, which could indicate that a shift in momentum is now in full swing. One final thing worth mentioning is just how close oil prices are to dipping back into oversold territory as this will be reinforcing support around the $43 handle and capping downside risks.
All things considered, there is a decent likelihood of us seeing gains extend moving ahead which now begs the question, where can we expect resistance to come back into play? As shown above, a key resistance level exists around the $46 mark which could prove to be a near-term peak for oil.
Largely, this can be chalked up to the presence of both a historical reversal level and the 38.2% Fibonacci retracement around this price. However, this resistance level is by no means an unassailable barrier to the potential rally and we could instead see gains extend all the way up to the $47.69 handle. At this price, the influence of the 100 day moving average will also be adding to the overall selling pressure – perhaps sparking yet another reversal and resumption of the overarching downtrend.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.