Technical Analysis of Oil
On the 8th of April this year oil briefly touched a maximum of 126.88 dollars 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 Fig. 10.10(a), 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.
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 Fig. 10.10(b), 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 the 4th of October.
The last week has seen a renewed attempt by the bulls to push up the price. Currently Brent is trading at 109.29.
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.
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