US OIL Technicals – Hitting Daily Kumo on news

Crude oil traded sharply lower during midday US trade when large offers emerged, fostering rumors about hedge funds being forced to liquidate their positions. Speculators joined in the slide, pushing price down by as low as $3 per barrel before calmness was restored. On top of that, there were talks of increasing supply with Saudi Arabia ramping up its production and UN’s offer of peaceful resolution to Iran’s nuclear program, which weighed prices further lower. Ironically, on the day which stocks saw the largest decline since November, Oil was strangely muted in respond to the FOMC minutes, which revealed that a number of Fed members are starting to get worried about the risks from the latest QE policy.

Perhaps the number of sellers have reached saturation point and is simply unable to sell some more due to risk considerations/limited credit line etc. If that is true, then the likelihood of a temporary rebound becomes higher as sellers will wish to take in their profits which will see price recovering. However that may be followed by further selling should the overall tone within the market remains “risk-off”.

Hourly Chart


Stochastic reading supports the short-term pullback scenario with readings in the Oversold region. Current levels are also very close to the previous Stoch trough back on 15th Feb, suggesting that readings could bounce higher from here – implying price heading higher. However, bear in mind that Price levels are much lower than Feb 15’s low, hence reducing the bullish signal even if readings start to push above 20.0. If price bounce up from here, 95.40 may provide resistance against further upside which may coincide with a bearish Stoch signal if readings push into Overbought region.

Daily Chart


Bears have current bullish Kumo support to content with on the Daily Chart. Though we have break below the recent support and Fib Retracement around 95.0, Ichimoku suggest to us that bearish action may not have strong follow-through from here baring heavy risk-off announcements of epic proportions. The Cloud has a thick width and price tend to trade sideways/uncertain within the cloud, hampering further downsides. On the other hand, Kumo’s perimeter provide strong support and we could still see price potentially bouncing off from here and back above the 95.0 mark. Stochastic reading is showing us that a trough may be in place. Even if price fall further from here, support could still be found between the 50.0% and 38.2% Fib retracement which is around the swing high from Oct 2012.

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