Oil still on a slippery slope

oil long

 

Crude oil is oversold, no doubt about it. Both weekly and daily charts show massively oversold oscillators. The problem is, for both near-termed (daily chart – below) and mid-termed (weekly chart – above) pictures, there is still very little evidence of a sustainable rally. The trend is down, MA’s have been shattered. The weekly chart does show a potential hammer reversal formation (final bar on graph)—the one beacon of light for this commodity chart. All momentum oscillators are oversold but not hooking up. Moneyflow, the most important indicator for longer termed potential, is awful. Sellers rule the roost.

On the daily chart, much is  the same: almost everything is bearish. RSI is the one potentially positive indicator. It has hooked up from its oversold position.

oil short

 

I read these charts as a sign that oil has more downside. Given the oversold momentum oscillators, I will expect a near termed rally—perhaps the RSI noted on the daily chart, and the hammer formation on the weekly chart is giving us a clue that it’s about to move up a bit. I’ve drawn dashed blue (celeste blue, I believe is the official name) lines at various resistance points. I place little hope in oil reaching one of the top lines. The first resistance on the weekly chart lies around $83-$84. That would be the best bet for a rally, if and when it happens.

 

One of my profitable moves this year was to buy oil last year when it was cheap, and then ditch most of it this October. We kept one oil stock, and kept our pipeline exposure (pipelines are not quite so sensitive to energy pricing, but there is some relationship given that some of them own production facilities). I will use a rally on oil to dump my last energy stock and perhaps reduce (not eliminate) some pipeline exposure.

I remain an energy bear.

 

Free Technical Analysis Seminar with Keith Richards – compliments of Markham Village Library: 

This is my second speaking appearance at this library—and I can tell you that these guys do a bang-up job. The event is catered with a very nice spread – complements of the library, and the atmosphere is excellent. If you live anywhere near this area, I’d highly recommend attending this event!

It’s at: 6031 Hwy. 7 East, Markham, Ontario,   L3P 3A7 – Wednesday, November 26, 2014, 7:00 PM

4 Comments

  • $75.00 OIL ($WTIC) APPEARS TO BE A VERY LONG TERM PRIMARY TREND. DO YOU AGREE THAT A FAILURE TO HOLD AT THAT PRICE ($75.00) WOULD HAVE CRUDE TESTING LOWER SUPPORT OF $72.00, $51.00 AND FINALLY $38.00? (THE CONSUMER DISCRETIONARY (XLY-N) WOULD BE THE BENEFICIARY OF LOWER OIL).

    P.S.: $USD WILL NOT HELP OIL PRICE EITHER SINCE IT SEEMS TO CHART A BULLISH LONG TERM PATTERN (WITH BREAKOUT AT 88.40)

    GOOD DAY

    J.P.

    Reply
    • JP – there is huge support on WTI at or around the mid-high $70’s. Then another level around $70-ish.
      As you feel–I am dubious about the long term outlook for oil. Having said that, it is overdue an oversold rally. So it may be a short termed trading opportunity sooner or later–key concept here is a short termed opportunity only!
      BTW–If you live anywhere near Markham, I am including a chart and some analysis of oil as part of my talk Wednesday.

      Reply
  • Hi Keith,
    I have energy stocks. I was wondering if I should sell them. I have Enerplus and Suncor. Would you still hold on to these stocks and wait for oil to go back up possibly over the next 6 months? I wish to decrease my energy exposure and rotate to stocks that will benefit from the decline in energy such as banks and consumer staples stocks. However, I do like the dividends in the energy stocks. I do not want to sell all my energy holdings at bargain basement prices if there is a chance that they would go up. Perhaps once things are working in energy I could go back to them. I appreciate your opinion.

    Reply
    • John–energy is massively oversold, as indicated on my blog. Its very, very close to an oversold bounce–I would use that bounce to sell. How high will it bounce? I cant say, but watch the technical levels of resistance for selling targets. I hold a little energy exposure–one being EnCana –hope to ditch it on the bounce as well. We peeled a lot of that stuff out in August, but the bit we hold is a negative.

      Reply

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