CL Technical Analysis | Week of July 25th

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

CL Technical Analysis

CL Technical Analysis

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.

CL Technical Analysis

  • 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

CL Technical Analysis

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

CL Technical Analysis

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

CL Technical Analysis

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

CL Technical Analysis

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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Disclaimer:

The Oil Trading Group. (“OTG”) does not hold itself out as a Commodity Trading Advisor (“CTA”).Given this representation all information and material provided by OTG is for educational purposes only and should not be considered specific investment advice.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.  (Go to www.OilTradingGroup.com for the full disclaimer).

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Our lead trader Jason Love has been an active day trader for the past 10 years. The Oil Trading Group was founded over 5 years ago to address the glaring need for quality day trading education. Prior to becoming a day trader, Jason ran a 300 seat call center, as the Vice President of Operations. As a veteran of the United States Navy, who served during Operation Desert Storm, Jason understands the value that structure and discipline have in day trading the volatile financial markets. In addition to providing day trading education to customers, he is also providing education services to a large futures trading firm, based in Chicago. When Jason is not trading, he is coaching his son’s Travel Select Youth baseball team and spending quality time with his family.

Jason

Our lead trader Jason Love has been an active day trader for the past 10 years. The Oil Trading Group was founded over 5 years ago to address the glaring need for quality day trading education. Prior to becoming a day trader, Jason ran a 300 seat call center, as the Vice President of Operations. As a veteran of the United States Navy, who served during Operation Desert Storm, Jason understands the value that structure and discipline have in day trading the volatile financial markets. In addition to providing day trading education to customers, he is also providing education services to a large futures trading firm, based in Chicago. When Jason is not trading, he is coaching his son’s Travel Select Youth baseball team and spending quality time with his family.

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