Invalidation of the earlier breakout lured the bears back to the market. What has this led to, and what effect might this have on the price of black gold in the very near future?
Crude Oil – Bulls’ Weakness and Its Consequences
Quoting our Tuesday’s Oil Trading Alert:
(…) Please pay attention to the volume. Despite another white candle on the chart, the buyers' involvement in shaping it has decreased for the third time in a row, raising some doubts about the bulls' strength.
Additionally, when we look at the four-hour chart, we see that (…) the price has not yet even reached the 38.2% Fibonacci retracement. Additionally, both the CCI and the Stochastic Oscillator remain in their overbought areas, which suggests that a reversal may be just around the corner, especially considering what we've seen in the past.
Similar levels of indicators could be observed on October 20th. What happened in the days that followed? Another bear march to the south has begun. That's why I think that staying out of the market without any open positions is the best option for now, because the test of the upper border of the yellow consolidation (marked on the daily chart) may be right around the corner.
From today’s point of view, we see that the technical information provided by the charts proved very useful in deciphering the market participants. The apparent bulls’ strength quickly turned into a visible weakness and resulted in a drop to the consolidation zone during yesterday’s session. In this way, the commodity invalidated the earlier breakout, which triggered further declines earlier today.
At this point, it’s worth noting that yesterday’s move to the south materialized in higher volume, which doesn’t bode well for the price of black gold.
How low could crude oil go in the coming day(s)?
In my opinion, the first downside target would be the green support zone created by mid-July lows (around $73.78-$74.08). This scenario is also supported by the current position of the indicators seen on the 4-hour chart. As you can see, there are no clear buy signals, which could encourage the sellers to fight for lower levels.
Before we begin today's analysis of the stock, please note the potentially dire implications that emerge from the weekly chart.
From the broader perspective, we see that today’s move took WTI below the medium-term green rising support line, which is a really bearish sign. Nevertheless, as long as there is no weekly closure below it, bulls still have chances to improve their situation.
What could happen if they fail?
The way to the barrier of $70 or even to the mid-June lows $66.80-$67.05 will probably be open, and we’ll consider going short.
Exxon Mobil vs. support and Resistance Lines
On the daily chart, we see that although the bulls managed to push the price higher in recent days, the combination of the red gap and the short-term red declining resistance line was strong enough to stop their march northwards.
As a result, the price reversed yesterday, which triggered the move to the downside. Although there is a positive divergence between the price and the CCI, and the buy signal remains in the cards, the sellers have more arguments on their side - not only the strong resistance zone mentioned above but also the volume accompanying the shaping of yesterday's candle.
This is clearly higher than what we could see during the last upward correction, which shows a greater commitment of the bears. On top of that, both indicators turned south, which will probably result in the negation of earlier buy signals.
What does it mean for the price?
In my opinion, during the next session(s), we will see a test of the medium-term green rising support line based on the previous lows formed in mid-March and mid-June 2023. The outcome of the battle here will determine the future of this company's stock.
Finishing today's alert, I'd like to ask you a very important question once again: Are you currently interested in any particular energy company? If so, please comment.
See you tomorrow.
Anna Radomska