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Technical analysis: Brent crude oil

On 8 April this year Brent crude oil briefly touched a maximum of $126.88 per barrel. Although this was just before the start of the summer season in the Northern Hemisphere, at that stage indications were that the price would show further increases in the months to come.

This, however, did not happen. If we look at the chart below, we see that Brent started trading downwards in a range from there. Towards the end of May it briefly touched the lower border of the Ichimoku cloud, only to turn around for a mini-upswing that lasted until the middle of June.

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This was repeated several times during the next few months: every time the lowest and highest points were a little bit lower than before.

Turning to the chart below, we see that the price briefly touched $116.57 on the 8th of September before heading down again. This time it broke through the 100.00 mark and briefly touched $99.10 on 4 October. The last week has seen a renewed attempt by the bulls to push up the price. Currently Brent is trading at $109.29.

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Given widespread predictions of a new recession in the major economies of the world and the ongoing Greek/European debt crisis, there seems to be little reason for a bull run in oil right now. Merely breaking upwards out of the Ichimoku cloud is not enough to warrant a long trade given the range-bound price movements of the past few months – a cautious trader would wait for the price to move well above $116.00 before venturing into a long trade.

Any new low below $99.00 could be the beginning of a new bear run which short traders might want to exploit.

Published: 14 October 2011

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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