US benchmark crude fell to a 3-week low on global economic growth concerns following the fall in Chinese exports and Japan GDP miss. Comparing price action of WTI and S&P 500, it is clear that WTI traders are not as bullish as stock traders. Comparatively this does make Oil traders a tad more bearish, but that may be unfair as stocks traders may be unreasonably bullish.
Indeed, seeing that prices have stabilized above 101.0 and failed to even test the swing low of Friday (Thursday US session) suggest that WTI Crude bears aren’t really that strong. That is not saying that downside risks are over as bearish momentum from last week’s decline remains in play – led by a surprise increase in Crude inventory stockpiles last week. Nonetheless, it is unlikely that sharp declines in WTI will be seen in the near future, and any sell-off should be met with significant support fighting against it.
There are good fundamental reasons for this support as well, as the energy market continues to hold their breath as the Ukrainian crisis heats up further with Crimean referendum coming up in a few days time. As such, it is understandable that there will be speculators looking for bargain buys in case of war breaking out which will keep prices afloat in the interim.
Support also can be seen from price action of daily chart. As long as prices stay above 101.0, the rally that started since mid Jan will remain in play, opening up a move back towards 105.0. Should bulls even manage to climb back above 105.0 within this week, stronger bullish acceleration and new 2014 highs would be highly probable. Stochastic indicator agree as Stoch curve has reversed and is threatening to cross the Signal line. Even though this reversal did not happen within the Oversold region, it is possible for Stoch curve to find “support” between 25.0 – 40.0, and as such we should not dismiss a bullish cycle signal if it does materialize.
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