WTI Crude rebounded back higher to retest 89.0 once more as Gold retraced a huge part of its losses. However, unlike Gold, which managed to push above the 1,400 resistance, Crude Oil was unable to break above the 89.0 resistance, allowing the downtrend that started 2 weeks ago to remain in play.
Stochastic readings have just peaked with a Stoch/Signal cross on the Hourly Chart. A bear cycle is now slated to start just as 89.0 resistance holds, adding further pressure for a move back towards 87.5 support in the form of consolidation back in 19th/20th Apr. If price breaks below 87.5, the swing low of around 86.0 will open up. Since current bear trend is still in play, it is possible that price may be able to break 86.0 to reinitiate bearish extension, and that would also spell the end of current bullish correction.
A move up is also possible, considering that 87.5 is not yet broken. If we choose to focus on reversal since 18th April, then we will have to admit that current correction is still in play with higher highs and higher lows. However, shortly ahead will be resistances from 90.2 leading to 91.2 in the form of interim consolidation found on 13th April (12th April EDT). As current correction is considered counter-trend, there remain the risk of bearish sentiments pulling back prices down quickly even though 89.0 has been breached. Hence traders may wish to wait for further confirmation to ensure that a full bullish reversal scenario is in play and not buy into bull-traps.
From the Daily Chart, we can see price forming a right handle similar to what is seen back in Nov – Dec 2012. This handle below 89.0 stretches all the way down to 84.0 which makes it a plausible bearish objective as long as the handle is in play. However, a break above 89.0 will negate the double top pattern that is currently in play, and potentially setting up a marginally bullish scenario as current lows of 86.0 is higher than the lows back in Nov 2012.
Fundamentally, demand of oil remains weak. There were rumors late last week that an emergency meeting was called by OPEC to discuss current oversupply and under-demand issue which resulted int price popping back towards 89.0. Unfortunately that meeting didn’t happen, but it does highlight the underlying sentiment of the market – market is feeling the pinch and knows that there are supply/demand issues that needs to be ironed out. As long as these issues are not address, it is hard to imagine Oil being able to push up higher significantly. Yes, a technical pullback after the fall from 94.0 is highly possible, and could even pull prices back up to 90 and subsequently 92.0, but long term bull trend will need more than a technical pullback to sustain and with spring and summer coming, it will be a tremendous task for price to break 98.0 2013 high from where we are now.
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