Technical Analysis Archives - Page 41 of 60

Crude oil prices continue to decline. Reports indicate the primary culprit is waning expectations for a meaningful OPEC output cut. In addition, some see record level production from countries like Russia and Canada as an equalizer to any cuts that may be made. There is also added uncertainty as US president-elect Donald Trump has pledged to loosen US drilling restrictions, which could boost domestic output next year.

Most technical factors are also negative. December WTI crude oil is poised to challenge the $41.58 swing low made August 3. This is in line with the 62 percent retracement of the move up from $34.06 to $53.62. Key support is $40.0, the 1.00 projection of the wave $53.62 – 41.58 – 52.22. A close below $41.6 would call for a long-term bearish outlook. A close below $40.0 would open the way for potentially $35.6 and lower.

That said, on Monday the move down stalled at $42.2 and formed a bullish hammer. This is a reversal pattern setup that indicates the upward correction may extend first. The hammer’s completion point is $43.9 and the confirmation point is $44.4.

A close over $44.4 would call for a more substantial correction to $46.0. This is crucial resistance for the near-term because it is the 38 percent retracement of the decline from $52.22 to $42.2. Without a bullish shift in underlying factors, it is doubtful that $46.0 will be overcome.

This is a brief analysis and outlook for the next day or so (in this case, a bit longer). Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas has fallen hard ahead of November’s expiration. Speculation that natural gas storage could reach record levels ahead of winter and warmer than normal weather forecasts for the next few weeks are reportedly reasons for falling prices.

Prompt month November futures fell to $2.627 on Wednesday where the 62 percent retracement of the move up from $2.168 to $3.366 was met. Prices rallied into the close and November settled at $2.731. This setup a daily morning star and hammer, which indicates prices may rise to $2.82 and even $2.88 before November expires on Thursday.

The negative outlook has also spilled over into the December contract, which fell below the crucial $3.01 swing low on Wednesday. This was negative because the move below $3.01 takes out what had been December’s primary up wave, $2.37 – 3.368 – 3.01. This significantly dampens the odds for a near-term recovery and a move to new highs.

The outlook is negative and there are no definitive technical factors that indicate the move down is over. However, the daily chart is oversold on the KaseCD and setup for a KCDpeak (bullish turn signal). In addition, the 200-day moving average at $2.99 held on a closing basis. These factors and the rally from $2.972 to $3.083 indicate an upward correction to at least $3.13 should take place Thursday. From that point, the move down may continue, or at least test $2.99 again. A close over $3.13 would call for a larger correction to $3.20 and possibly $3.26. This would also indicate a trading range is likely on the horizon.

The 200-day average at $2.99 will be December’s crucial support on Thursday. A close below this would solidify the negative outlook and open the way for $2.93 and lower. Below $2.99, the next major target is $2.82. This is the 62 percent retracement from $2.37 to $3.556.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Traders are reportedly waiting for more information regarding the tentative OPEC deal to cut crude oil production before making up their minds about whether to be bullish. Some pundits say that until the deal is confirmed next month, crude oil prices may continue to soften. A stronger U.S. dollar also reportedly weighed on crude oil prices late last week. However, the dollar has formed a daily evening star setup that suggests it may pull back a bit before rising again.

Last week, December WTI formed a pseudo double top at nominally $52.19 (highs of $52.16 and $52.22). The pattern’s confirmation point is the $49.79 swing low. On Monday, December fell to $49.62 but was unable to confirm the double top with a close below $49.79.

The rally into Monday’s settle confirmed bullish KasePO momentum divergence on the $0.35 Kase Bar chart. It also setup a daily morning star and hammer setup. This candlestick pattern indicates a test of last Thursday’s $51.1 midpoint should take place Tuesday. This is a very important level for the near-term. $51.1 is also in line with an intra-day $51.0 swing high and the 62 percent retracement of the decline from $52.22 to $49.62. A close over $51.1 would call for $51.6 and possibly for the $52.19 double top to be challenged again.

That said, while $51.1 holds, there is still a good chance for the move down to extend because the double top is still intact. A close below $49.79 would confirm the double top and open the way for $49.3 and lower.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas was spurred higher last Thursday after government data showed a smaller than expected build for the week ended October 7. However, the move’s strength and resilience reportedly came as a surprise for many market participants due to mild weather across most of the U.S. The market remains well supplied according to many analysts and rig counts have begun to climb. The natural gas rig count expanded by 11 last week, which is the largest increase since late 2014.

This week, November natural gas prices have fallen to $3.144 so far and settled below major support at $3.21 on Wednesday. The move down stalled just before reaching the next target at $3.12.

The subsequent move up from $3.144 has been shallow, choppy, and is forming a bearish flag. Bearish flags are reasonably reliable patterns that indicate the market should continue to decline. The lower trend line of the flag is $3.15 and the upper trend line is $3.21. The $3.21 level may be tested first but should hold because odds favor a break lower out of the flag.

Tomorrow, look for prices to break lower out of the flag and fall to at least $3.12. A close below this would call for $3.06. For the move up to continue in the near-term, $3.06 must hold. This is the 62 percent retracement of the move up from $2.866 to $3.366. A close below $3.06 would shift odds in favor of testing the $2.866 swing low.

Conversely, a break higher out of the flag and close over $3.21 would call for $3.27 and $3.32. A move above $3.32 would take out the wave down from $3.366 that projects to $3.06 and lower.

Media sources state that traders and analysts are looking to current warm weather in the south and anticipation of a colder than normal winter as catalysts for higher natural gas prices. However, some reports indicate many traders and analysts remain skeptical and have stated that the move up is too soon in anticipation of real weather. These traders and analysts are concerned that an early move higher may lead to disappointment due to inventories that could exceed record levels by the end of this month.

Natural gas’s move up has been resilient and reflects the market’s desire for a longer-term bullish move. The bullish sentiment was reflected by the move to $3.30 on Monday. However, this was a highly confluent wave projection that has held and November has pulled back to $3.184 so far.

From a technical standpoint, there is little doubt that the move down is corrective. The decline has been shallow and choppy and may form a bullish expanding wedge. However, today’s close below Monday’s midpoint and the waves down from $3.30 call for the correction to extend at least a bit more before the move up continues.

Support at $3.18 is still important. A move below $3.18 would call for at least $3.14, which is a confluent wave projection and retracement level. A close below $3.14 would open the way for a more significant correction before prices rise to a new 2016 high.

Resistance at $3.27 must hold for the correction to extend to $3.14. A move above $3.27 before $3.14 is met would indicate the correction is complete and call for prices to rise to crucial targets above $3.30.

WTI has primarily risen on the momentum created by the tentative agreement between OPEC members to cut production by 200,000 to 700,000 barrels per day in coming months. The details of such a deal are still being ironed out and would have to be ratified at OPEC’s meeting in November.

Some traders and analysts reportedly believe that the bullish sentiment from the OPEC announcement is now priced into the market and that further external catalyst is necessary to push prices higher. WTI showed signs of exhaustion last week. However, prices were boosted by an unexpected decline in U.S. crude oil inventories late in the week and rose to $51.6 on Monday.

OPEC detractors remain skeptical because much of the world’s oil is now produced outside of the cartel. Many pundits believe that it will take more than OPEC cuts to stabilize oil prices. To that end, Saudi Arabian and Russian officials are set to meet in Istanbul this week to discuss such matters. However, several reports indicate comments made by Russia’s energy minister dampened hopes that an agreement would be reached during their meeting.

The technical outlook for WTI is bullish, but there have been a few signs of weakness. The recent wave formation up from $43.06 is overextended, the Stochastic is overbought, and most momentum indicators are setup for daily bearish divergences. Although there is no definitive technical evidence the move up will stall, a correction should take place soon.

November is approaching key resistance at $52.6. This is the point at which the wave formation up from contract low connects with the wave up from early August’s low. $52.6 is the 0.618 projection for the wave $34.1 – 53.39 – 40.77 and the 1.00 projection for the wave $40.77 – 50.0 – 43.06. A close over $52.6 would open the way for a longer-term bullish outlook with targets in the upper $50s and low $60s. WTI should rise to $52.6. However, given the importance of this level, we expect to see a correction before $52.6 is overcome.

Should prices turn lower before rising to $52.6, look for initial support at $50.5 and then $49.6. A close below the latter would call for an extended correction to $48.3. A normal correction should hold $48.3 because it is the 38 percent retracement of the move up from $43.06. A close below this would call for a more substantial correction before the move up continues.

November natural gas has shown signs of strength over the past few days. November held support near $2.90 and on Tuesday completed a daily hammer when prices settled above $2.94. A bullish RSI divergence was confirmed at $2.866 on several intra-day charts. On Wednesday, the move up rallied to a very important $3.05 target ahead of the close. Finally, as of Wednesday, the weekly candlestick forms a bullish engulfing line.

These positive factors indicate the move up should continue to $3.09, $3.12, and possibly $3.18 over the next few days. A move to these targets would also take out the crucial $3.079 swing high. This would significantly dampen the odds for a continued decline to targets below $2.90.

That said, $3.05 is a potential stalling point. This is because $3.05 is the 62 percent retracement of the decline from $3.166 to $2.866 and the 1.00 projection of the wave $2.866 – 2.99 – 2.922. There are no definitive factors that indicate the move will stall at $3.05, but caution is warranted.

Should prices pullback from $3.05, support at $2.98 should hold. The key level for the near-term is $2.94. This is the 62 percent retracement of the move up from $2.866 to $3.058. A close below $2.94 would call for another test of the $2.866 swing low and most likely signal that a trading range is forming.

Bullish optimism regarding OPEC’s preliminary agreement to cut crude oil production has reportedly fueled the move higher during the past week. The news came last Wednesday after members met during a conference in Algeria. OPEC will meet again on November 30 to further discuss and possibly ratify the deal. However, many are still skeptical that an OPEC deal will be enough to balance supply and demand if production is minimally cut or capped near record output levels.

Technical factors reflect the underlying bullish sentiment. The monthly and weekly candlesticks are positive and call for the move up to extend. In addition, November WTI overcame the $48.38 swing high. This was important because the move above $48.38 takes out the primary wave down from $50.0 and significantly dampens odds for a continued decline in the near-term.

On Monday, an important target was met at $48.9. The waves that projected to $48.9 now call for November to challenge the $50.0 swing high. Overcoming $50.0 would solidify a near-term bullish outlook and call for key resistance at $52.3. The $52.3 objective is the gateway for a longer-term bullish outlook.

That said, bearish divergences were triggered on the $1.00 Kase Bar chart early Tuesday. Therefore, a correction might take place before the move up extends to $50.0. There is initial support at $48.0 and then $46.9. The latter is expected to hold. A close below $46.9 would call for $46.0 and then key support centered around $45.0 to possibly be tested.

Reports indicate increasing OPEC exports out of Nigeria and Libya and a partial shutdown of a major U.S. gasoline pipeline weighed on crude oil prices last week. In addition, U.S. rig counts rose to 416, the highest level since February.

That said, some traders are turning their attention to the late September meeting between members of OPEC and Russia to discuss capping production. However, pundits think any meaningful consensus coming out of the meeting is unlikely.

The majority of technical factors are negative and call for crude oil’s decline to continue.

Early Monday, November WTI rallied to $44.7. However, the move up stalled and failed to settle above Friday’s $44.32 open. A bullish Harami line and star setup formed, but the long upper shadow indicates the pattern will likely fail.

Tomorrow, look for at least $43.1 and possibly $42.7. Both targets connect to major support at $42.1, which is a confluent projection for the primary waves down from $50.0 and $48.38. This is also the last major target protecting the $40.77 swing low. Therefore, $42.1 may hold, at least initially.

Resistance at $44.3 is still important for the near term. However, key resistance for the next day or so will be $44.7. A close over this would call for an extended upward correction to $45.3, $45.9, and possibly $46.5.

Natural gas continues to oscillate in an erratic and corrective range. After stalling near $3.00 on July 1, the prompt-month futures contracts have challenged the boundaries of a range between nominally $2.53 and $2.95. This is similar to the range that natural gas traded in for nearly nine months of 2015 before breaking lower in mid-September.

Longer-term, the outlook is positive and natural gas will likely rise to targets above $3.00 before the end of the year. However, since July 1 there has not been enough fundamental support to sustain a move above $3.00. The summer was hot this year, and demand was strong, but production kept pace. The market is well supplied and will likely end the injection season near or just above historically high storage levels as winter approaches.

Many long-term technical factors are positive, but there are short-term factors that indicate another test of support is looming.

Early Wednesday, October natural gas rose above the very important $2.949 swing high and was poised to overcome the July 1 high of $3.022. However, October stalled at $2.978 and fell to $2.852. The reversal and blow-off high indicate the market is not ready for a break higher out of the corrective trading range.

The recovery from $2.852 at the end of the day was somewhat positive. However, momentum is setup for bearish divergence on the daily chart. A bearish divergence forms when prices are rising to new swing highs but momentum is making lower highs. This signal shows that the move is nearing exhaustion and that a statically significant turn may take place. To confirm the divergence, a swing high in price and momentum must form over the next few days.

A close below $2.87 will complete Tuesday’s shooting star reversal pattern and open the way for $2.83 and $2.72.

If the move up is going to close over $2.95 and rise to the next target at $3.03 soon, $2.83 should hold. This is the 38 percent retracement of the move up from $2.58.

Key support is $2.72 because it is the 0.618 projection of the wave down from $3.022 and the 62 percent retracement of the move up from $2.58. A close below $2.72 would call for another test of the recent ranges lower threshold.

Crude Oil Forecast: WTI Forms Bullish Hammer

Tag: Technical Analysis