With Resistance Falling, Can Oil Hold The Next Support Level?
By Jim Hyerczyk - Dec 11, 2015, 3:17 PM CST
February WTI Crude Oil
February WTI Crude Oil futures continued to slide last week, rapidly approaching seven-year lows. Traders have put the friendly U.S. Energy Information Administration stockpiles report out of their minds and have now shifted their focus on the global supply glut and the strengthening U.S. Dollar.
The daily February Crude oil chart indicates the market is in a free-fall. The market is currently trading inside a bearish downtrending channel. The channel indicates that resistance could fall next week from $38.82 to $36.32. This would put pressure on prices. Support is expected to decline from $36.52 to $34.02 throughout the week.
(Click to enlarge)
The main trend is down according to the week swing chart. The downtrend was reaffirmed when the $40.69 main bottom was taken out last week. This price is new resistance along with a downtrending angle at $41.60.
At the end of the week, February Crude Oil was straddling a downtrending angle at $38.69. Holding above this angle could fuel a short-covering rally.
A sustained move under $38.69 will indicate that the selling is getting stronger. The next target is a downtrending angle at $36.69. The weekly chart will open up even further under this angle with the next likely target $32.69.
With the exception of a weekly closing price reversal bottom (Lower-Low and Higher-Close), the market is expected to continue to move lower from layer-to-layer until…
February WTI Crude Oil
February WTI Crude Oil futures continued to slide last week, rapidly approaching seven-year lows. Traders have put the friendly U.S. Energy Information Administration stockpiles report out of their minds and have now shifted their focus on the global supply glut and the strengthening U.S. Dollar.
The daily February Crude oil chart indicates the market is in a free-fall. The market is currently trading inside a bearish downtrending channel. The channel indicates that resistance could fall next week from $38.82 to $36.32. This would put pressure on prices. Support is expected to decline from $36.52 to $34.02 throughout the week.
(Click to enlarge)
The main trend is down according to the week swing chart. The downtrend was reaffirmed when the $40.69 main bottom was taken out last week. This price is new resistance along with a downtrending angle at $41.60.
At the end of the week, February Crude Oil was straddling a downtrending angle at $38.69. Holding above this angle could fuel a short-covering rally.
A sustained move under $38.69 will indicate that the selling is getting stronger. The next target is a downtrending angle at $36.69. The weekly chart will open up even further under this angle with the next likely target $32.69.
With the exception of a weekly closing price reversal bottom (Lower-Low and Higher-Close), the market is expected to continue to move lower from layer-to-layer until the selling exhausts itself.
February Unleaded Gasoline
Based on the weekly price action, the energy market to watch this week may be February Unleaded Gasoline. The price action suggests a divergence may be forming between unleaded gasoline and crude oil. Helping to support this notion are concerns over a refinery outage and possible cuts in production.
According to CNBC, U.S. gasoline prices jumped more than 3 percent after report that British Petroleum’s (BP) 405,000-bpd Whiting catalytic reformer unit was shut down on Wednesday. Additionally, the profit for refining a barrel of crude into gasoline rose to its highest seasonal level since 2012.
(Click to enlarge)
The main trend is down according to the weekly swing chart. Last week, the selling pressure was strong enough to take out the previous swing bottom at $1.2144, reaffirming the downtrend. February crude oil futures reached a low at $1.2127. This was slightly above the late August bottom at $1.1951.
The inability to follow-through to the downside and the surprise news event helped trigger a rebound rally that has put the market in a position to form a potentially bullish closing price reversal bottom on the weekly chart.
A close over $1.2839 on December 11 will form a closing price reversal bottom. This could create enough upside momentum to fuel a follow-through rally this week. The first upside target is the swing top at $1.3860. A trade through this price will turn the main trend to up on the weekly chart. The next target above this level is the swing top at $1.4560.
Watch the price action and read the order flow at $1.2839 on Friday, December 10. Trader reaction to this level will tell us whether the bears are still in control or weakening.
February Natural Gas
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February Natural Gas futures are likely to finish on their low despite an EIA report that showed a stronger-than-expected weekly drawdown. The current downside momentum has put the market in a position to challenge the psychological $2.00 level that hasn’t been breached since 2012.
The milder-than-expected weather is expected to continue into the end of the month. This should continue to put pressure on prices. Since temperatures were warmer than expected, the stronger-than-expected weekly drawdown likely suggests that U.S. producers are pulling back on production or importing less from Canada. This could help slow down the price slide.
