Perhaps two of the most watched commodities out there are oil (due to its significance to the economy) and gold (which has become far more in focus to investors as a defensive play). Technically, oil looks unattractive at this juncture, while gold looks bullish. Let’s take a look at the charts.
If you follow this blog, you know I’ve probably spent more time talking about gold (and silver) than I should. But the trading for this commodity has been fairly profitable for me in the portfolios I manage, given what appears to me as a fairly readable chart. In my last gold update (http://www.valuetrend.ca/?p=1527 ), I noted that gold would fall into a technical “buy” zone somewhere between $1680 support and $1700. I advised that we should consider a trade on a stochastics hook-up and crossover. Gold reacted as expected, and bounced off of the $1680 support right on schedule. I confess that I bought at just over $1700 on the stochastics hook that took place the day before its $1680 support bounce – but I’m satisfied with my entry point. Two things that I’d like you to note on the gold chart above:
- First, please note the bullish 50-200 day MA crossover back in September, telling us that the big trend is bullish. Both lines are sloping up. Seasonal trends for gold are bullish in the big picture as well. This gives me confidence that trading off a near-term low point is a good bet, given the bigger positive picture.
- Next, note the bounce off of prior-noted support with really nice big white candles (bulls are in charge), along with a nice rising stochastics line.
Gold looks to be a reasonable bet for a rally to at least its last resistance point of $1800.
I’ve also covered oil a few times in recent blogs, noting that the chart is in a bearish trend (http://www.valuetrend.ca/?p=1533 ). We can compare the chart of oil with that of gold, and see a much more bearish picture in this commodity. Here are a few points to note on oil:
- In contrast to the gold chart, the WTI crude chart shows a bearish big picture. Note the bearish 50-200 day MA crossover back in June. Both lines are sloping down. Seasonal trends for oil are bearish until later in the winter. The bigger picture for oil is unfavorable.
- In the shorter term, support has been broken at $92, and stochastics shows no sign of turning up despite its oversold condition. This suggests a potential for a tepid rally at best, without much hope for meaningful strength. The trend is down, and no turnaround in price has occurred at this time. Oil could see its old low of below $80 before long.
While there is a chance for some sort of oversold rally in the near-term for crude, the bigger picture for a more meaningful upside remains doubtful at this time.