Oil is telling us something. Should we listen? That is up to you. Over the last year crude oil has shot a few technical warning shots for investors. In this article we will discuss them.
The most obvious thing in this chart is of course the lower highs over time. Easy to see that since the high in early 2011 which was achieved in large volumes and volatility, oil was going sideways and making lower highs over time.
The lower highs are accompanied with low volume which actually in this case supports the bearish move. But not only price and volume are participating in this party:
Here we see 2 of the most popular indicators, MACD and RSI being very negative compared to price, as crude oil price does a slightly higher low in 2012, RSI and MACD make a lower low and telling optimists to watch out. Also RSI currently below 50 and MACD below 0, which says they are still both bearish overall.
A look at the latest correction reveals it was a very accurate Fibonacci retracement from the initial bearish move from the high, which makes this bearish perspective even stronger:
As we can see, oil has corrected 61.8% of the initial move down, which is very accommodative to bearish moves, especially ones that are just starting.
Staying below $100 per barrel is of course essential for the continuation of the bearish trend.
Point and figure helps us see more of the same, as oil breaks down (black circle) a sideways move into new lows, after breaking below $88 per barrel. Also the lower highs are seen easily in this chart as well, after the $110 high.
Point and figure Is a technical way of looking at prices, regardless of time.
The (almost) last chart is oil priced in gold. As we can see the pricing has dropped significantly in the last few months, compared even to gold, which gives another strong argument for the bears of oil prices.
The big picture for oil looks bearish, as the picture for the energy sector that depends directly on high oil prices. And who benefits?
Natural gas making new highs – as money rushes out of crude and into alternative energy sources.
Conclusion : oil looks bearish on the chart, and indicators and other assets confirm.
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- Tags: chart, Commodities, crude oil, macd, Market Analysis, News & Market Analysis, p&f, price, rsi, volume