Technical Analysis – Oil, 4-hourly: holding above the 7-month low of 91.20
January 13, 2014 9:42 am
(click to enlarge)
Oil has been dropping recently on expectations that the deal between Iran and six major powers will lead to increased supply of Iranian oil to the markets.
Oil for short-term delivery fell to 91.24 on Thursday 9th January, which is a 7-month low. It should be pointed out however that the break was not convincing as there was not enough follow-through selling near an area that has also been tested 2 ½ months ago.
Since hitting the 7-month low, there was a rebound to the almost 93 dollars level, but this rebound has been more or less capped by the 21-period exponential moving average – EMA (21). If the rebound does continue however, there will be some resistance around the 94.20 level, which is also close to the 50-period simple moving average – SMA (50).
If that level is broken, the next target would be the 100.75 mark, which is the 3-month high.
Some very interesting conclusions are the result of looking at the MACD indicator. Specifically, the MACD did not confirm the new 91.24 low, as the indicator was climbing higher when the new low was hit. One can therefore talk about a divergence between the underlying price action and the MACD, which in turn could result in a turn in the market.
The MACD is giving mixed signals. First of all, the MACD is negative but its trend is up. Another positive sign is that the MACD is above its red signal line. But it could be that this bounce follows the indicator reaching oversold levels earlier.
Overall, the bounce in oil has not yet given enough clues that it is strong enough to continue. The divergence in the MACD does make it look interesting that it could be a turning point of the negative trend. But unless there is confirmation from the underlying price action that there is a durable bounce, the trend remains negative.
(click to enlarge)
Oil has been dropping recently on expectations that the deal between Iran and six major powers will lead to increased supply of Iranian oil to the markets.
Oil for short-term delivery fell to 91.24 on Thursday 9th January, which is a 7-month low. It should be pointed out however that the break was not convincing as there was not enough follow-through selling near an area that has also been tested 2 ½ months ago.
Since hitting the 7-month low, there was a rebound to the almost 93 dollars level, but this rebound has been more or less capped by the 21-period exponential moving average – EMA (21). If the rebound does continue however, there will be some resistance around the 94.20 level, which is also close to the 50-period simple moving average – SMA (50).
If that level is broken, the next target would be the 100.75 mark, which is the 3-month high.
Some very interesting conclusions are the result of looking at the MACD indicator. Specifically, the MACD did not confirm the new 91.24 low, as the indicator was climbing higher when the new low was hit. One can therefore talk about a divergence between the underlying price action and the MACD, which in turn could result in a turn in the market.
The MACD is giving mixed signals. First of all, the MACD is negative but its trend is up. Another positive sign is that the MACD is above its red signal line. But it could be that this bounce follows the indicator reaching oversold levels earlier.
Overall, the bounce in oil has not yet given enough clues that it is strong enough to continue. The divergence in the MACD does make it look interesting that it could be a turning point of the negative trend. But unless there is confirmation from the underlying price action that there is a durable bounce, the trend remains negative.
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