Commodities show signs of a short-term recovery
While commodities have been on the slide over recent years, the charts are beginning to show that we may have reached the bottom. Looking at WTI crude and gold we can see some indications of a recovery, at least in the short term.
WTI crude and gold have become very oversold of course, after a long run to the downside. If you are a regular follower of my weekly articles you will be aware that gold hit a very important longer-term support level at 1087/86 where we predicted a potential bottom to the bear run.
If you study the chart below you can see that gold didn’t see a daily close below this important 1087/86 level over the past several weeks. If you also follow me on Twitter or are a subscriber to our daily gold report you will know that we have been bullish on gold since it hit 1087/86.
I have not seen so many bearish comments and articles on gold in a very long time – always a good signal that we may have seen a bottom in the market. We have even seen net short positions in gold for the first time on record. Markets always look their most bearish at the bottom!
Now at last we are seeing the recovery as we had predicted towards our first target of 1122/25 for short-term profit-taking long positions. In the longer term, as long as we hold above 1114/13 we should see gold start to trend higher and target 1135/40 and perhaps as far as 1150/55 into the autumn.
WTI crude had collapsed as far as $43.35 yesterday. However we have just managed to hold above the March lows for the bear market run at $42.03.
I would not classify this as a bullish double bottom but having become oversold we have seen a bullish reversal candle yesterday. This is enough to make me think the downside is limited now and we should be ready for a short-term recovery. I am not talking about the start of a bull market (which could actually be the case for gold) but it does look too risky being short of oil at this stage.
If this daily bullish reversal could be matched with a weekly bullish reversal, by which I mean a close on Friday above $47, I would feel increasingly confident of a recovery as far as $50.00/50.50. This would give oil a decent 15% bounce in a bear market. Before Friday’s close bulls will need to see a push higher through $45.70/75 initially to target quite strong short-term resistance at $47.60/70. Above here we may just be able to target strong resistance at $50.00/50.50.
Of course a break of the $43.35 low would mean all recovery bets are off and this would kill the short-term positive candle we saw yesterday. Be ready for a test of those March lows at $42.03!
Jason Sen – Technical Analyst & Trader
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