If you have followed this blog for a while, you will know that I have been rather bearish on most of the major commodities since 2011. Here’s a blog I wrote in May 2011 noting the potential for a long term cyclical peak for the broad commodities basket, which occurred on schedule in 2011: https://www.valuetrend.ca/?p=672.
Within any longer termed trend, you will find counter-trend rallies. WTI crude rallied in a countertrend movement over the summer of 2013. A short termed top broke in October to end that rally.
While my longer termed perspective remains bearish for oil, there may be some support coming in at $91-$92 – leaving oil with the potential to drop a few more dollars. Today’s chart shows us how $92 held for most of 2013, with a short termed breakdown through that level in April. At this time, momentum (RSI, Stochastics) has rounded over and is headed lower, and the infamous “death cross” (50 day MA crossing down through the 200 day MA) has added to the bearish picture. Relative strength is rather flat at this time, but showing early signs of breaking down. Watch for oil to find support at $91-$92. But remain cautious before buying – wait at least 3 days for a bounce off of that level to confirm support.
I continue to advise caution for long term investors on major commodities such as oil and gold due to their longer termed bearish charts. However, counter-trend rallies can be played by those who enjoy the risk/reward potential behind such trading strategies. Oil may present such a short termed trading opportunity soon.
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