Thank you for reading this week’s CL Technical Analysis.
Crude oil was down 4% this week on lower volume. Additionally, the 10 Day Average Range for the week on CL was an average of 173 Ticks. However, this weeks actual range was down about 22% or 135 ticks for the week.
CL Technical Analysis – CME Volume and Daily CL Range
The one big volume day for the week was Wednesday with the spike coming during the weekly EIA inventory report. As you look back into the previous 2 weeks of July, volume was down considerably.
Factors Affecting the 4% Decline in Price
- The USD reached a 4 month high on Friday. The USD has a negative correlation to the CL and as the USD increases in value it negatively affects the price of the CL.
- Baker-Hughes rig report released on Friday showed that the rig count rose for a 4th consecutive week. This was the 7th time in 8-weeks that there was an increase in the rig count. This is important as more rigs = more production. More production = more supply and the potential for lower prices.
- Crude Oil inventory is at a surplus of 5.19 million barrels. This is an all time high for this time of year.
- Genscape report a +725k build at the the Cushing, OK delivery point.
- Exports from southern Iraq are up to 3.28 million barrels per day from the average of 3.18 million barrels per day.
- Global economic uncertainty surrounding the still unclear affects from the Brexit vote.
Factors Mitigating Further Decline
- Increased power consumption in Saudi Arabia has drawn down oil reserves to the lowest levels since 2014.
- The Financial Times reported that India’s economy grew 7.5% and is now forecasted to overtake Japan as the third largest consumer of oil behind only the U.S. and China.
- Increased terror type attacks threatening global and economic security.
- Fall out from the failed Turkish coup attempt and how that will impact the strategic oil pipelines.
CL Technical Analysis – The Charts
Weekly Chart – Market Structure
One of the retracement levels (not a standard fib) is the 70.5% retracement. As you can see from this weekly chart we topped out right at that level in early June. Since we hit that retracement level, we have been on a steady move to the downside finding support at the 50% retracement level this past week. This will be an interesting chart to keep an eye on as we have a a descending triangle target (see chart below) around the 38.2% support area.
Daily Chart – Market Structure
Since we have broken the descending triangle formation, we have begun to accelerate the momentum to the downside. We are beginning to find support at the bottom of the consolidation range that was tested one year ago. Last year after testing the bottom of this range, we quickly rallied in October to the top of the range before selling off into 2016 to the February lows. At present there is an interim target of $39.68 (break of the descending triangle measured move) that we will be watching.
Daily Chart – Momentum Indicators
With the exception of the 200 SMA (black line) price has crossed under all the MA’s. This is obviously a strong sign that the market is beginning to turn. Additionally, the ADX has crossed 20 signaling that the -DI (red line 2nd panel) crossover has begun to pick up speed and momentum.
Daily Chart – Oscillators
With the exception of the slow stochastics, this chart show room for continued movement to the downside. We are not oversold yet on the 5 and 13 period RSI and we are still above the standard deviation line on the Bollinger Bands. All indications that there is still potential for further moves down.
CL Technical Analysis – Weekly Price Levels
Above the Market
46.78 – 46.95
48.07 – 48.38
49.43 – 49.79
Below the Market
42.56 – 42.07
41.52 – 41.21
40.36 – 39.68
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