In the last week, you've had the opportunity to read daily about the fate of black gold. At the moment of writing these words, the technical situation has not changed significantly, which means that yesterday's scenario remains valid.
Technical Picture of Crude Oil
Yesterday's session ended on a minimal downside for the black gold, but it didn’t affect the short-term technical picture, which means that yesterday's analysis is still valid today.
The first positive thing that catches your eye on the above chart is the breakout of the red declining resistance line based on the peaks formed in late October and early November.
At the same time, it's the upper border of the declining wedge, which suggests that continued growth may be just around the corner - especially if we add in the buy signals generated by the CCI and the Stochastic Oscillator.
Unfortunately, all the good humor is spoiled by yesterday's volume, which was much lower than Friday's session, and the neighboring 200-day moving average, which, combined with last week's peak, forms the first resistance zone.
What might that mean for buyers?
In my opinion, there’s an increased risk of returning south and at least testing the strength of the support-resistance line broken yesterday. If the bulls have indeed recovered from last week's bear attacks, they should have no problem maintaining this close technical support.
What bull scenario could we consider then?
The first target for buyers would certainly be the upper border of the red descending channel (currently around $83.21). If they were able to move above it the way to around $88.67, where (at the moment) the range of the upswing is equal to the height of the red declining wedge, could be open.
If, however, there was a reversal first (the above-mentioned verification of yesterday’s breakout, which is a very classic technical development of events after the breakout) the rebound could take the price to slightly lower levels – around the 61.8% Fibonacci retracement and the peak formed on October 27.
Nevertheless, today's price action has resulted in declines. Let's take a look at the four-hour chart below.
At the moment of writing these words, crude oil moved to the previously broken support/resistance line and tested the 61.8% Fibonacci retracement, hitting the upper line of the consolidation that w observed last week.
Although the price moved a bit higher, the current position of the indicators suggests that further declines may be just around the corner. Nevertheless, as long as there is no daily closure under the previously broken upper line of the declining wedge (marked on the daily chart) the recent scenario is up-to-date.
Summing up, I think that very careful observation of the behavior of the bulls in the upcoming session(s) will allow us to choose the most favorable place to open a position.
And now, as announced yesterday, it's time to analyze your wishes - Cameco Corporation, Devon Energy Corporation and the uranium analysis. Let's start with the uranium, because its future is tightly tied to one of the companies you've chosen.
URA Global X Uranium ETF – What's Bullish and What's Bearish?
The monthly chart is very interesting because it shows with the naked eye the serious resistance that bulls will have to face in the near future. What do I mean? A very strong resistance zone based on peaks formed in July 2013 and August 2013 and March 2014.
As you can see, it was strong enough to stop a months-long buyers' march in November 2021. A few months later, in April 2022, its relatively close (from a month's perspective) neighborhood was enough to tempt the bears to intervene and return to the floor. This suggests that the 30 barrier is still the key level (psychological barrier) which determines the future of uranium.
As we all know, history repeats itself, raising the risk that buyers will once again succumb to the pressure of this major resistance zone that has been holding back growth for several years.
In the first place, this scenario is supported by the indicators which show negative divergences between the RSI, the CCI, and the uranium price. In addition, the CCI and Stochastic Oscillator are in their overbought zones, which as we can see in the chart, has repeatedly encouraged sellers to act.
But before we cross out the bulls' chances of higher prices, let's see what technical arguments emerge from the medium-term chart. Will the buyers find allies here?
Here, one of the first things that catches your eye (outside of the red glowing resistance zone reinforced by barrier 30, of course) is the triangle marked with the blue dashed lines and orange consolidation.
But one by one...
The top of the formation held the bulls for a while, but a breakout in late August effectively galvanized buyers to fight for higher levels, resulting in an attack on the peaks in April 2022. The weeks-long march weakened the bulls somewhat, and they gave in to the resistance – but not for long.
Despite the decline, buyers started to gain strength, consolidating in the area of 24.45-26.99. It was a very good decision, which discouraged the sellers from attacking, which contributed to the next upswing, which in mid-November raised the uranium above consolidation.
What does that mean? From a technical point of view, such price actions usually translate into further increases - at least to the level which corresponds to the height of consolidation. So, for uranium, that would be a minimum of 29.53, which means there's still room for growth.
If we take into account a breakout above the upper border of the triangle mentioned earlier, the potential for growth could be as high as 30.77. And that's where the problem arises - in the form of a strong resistance zone and level 30 and its potential breakout.
All the indicators marked on the chart show clear divergences at the moment, which is not good for the bulls, but on the other hand, there are no sell signals that would attract the bears at this moment.
Will the daily chart give us any further clues? Let's see.
From a short-term perspective, we see that buyers have achieved a lot: first of all, they have managed to maintain the lower border of the green growth channel, which (when coupled with the 50-day moving average) now serves as solid short-term support.
Last week, they managed to break above the September peak, creating an additional green price gap, which, combined with the previously broken high, will provide the bulls with a very short-term first line of support.
But there's one more positive thing that we can see when we zoom in on this chart. What do I mean? Let's take a look below.
Last week's gains also broke the upper border of a quite short-term black growth channel. At the beginning of the month, buyers were unable to hold the price above it, and it moved back to the nearest solid short-term support (based on the lower border of the black channel, the lower line of the green channel, and the aforementioned 50-day moving average).
However, this time is different - the bulls have gone further north, creating another gap and a new November peak. These are undoubtedly positive developments, but one gap after another could signal that this is the last bull run, especially if we consider the volume seen in recent days.
As you can see from session to session, it's been dropping (which should not be the case if you're pushing significant resistance), suggesting that the movement may not be as healthy as it first appears.
In addition, yesterday's decline has increased the volume, which, combined with the shape of the candle, does not look pleasing. Why? Because there's been a bearish engulfing pattern that signals lower prices to come - especially if we add to that the negative divergences between the RSI and the CCI and the price of uranium. The CCI and Stochastic Oscillator levels are also not looking too good for the bulls, signaling that a market turnaround may be just around the corner.
Summing up, despite many recent buyer successes, the technical picture emerging from the charts is not very optimistic and suggests that a reversal may be just around the corner. However, the most reliable, even alarming, signal for a reversal will be the invalidation of the earlier breakout above the September 28 peak and the upper border of the black rising trend channel. Until this time, one more attempt to move higher cannot be ruled out. It's worth keeping an eye very closely on the daily chart.
Having said that, let's move to our first company of the day.
Cameco Corp. – Buyers vs. Strong Resistances
Looking at the monthly chart, we see that the stocks of the world's largest publicly traded uranium company have also reached significant resistance based on the June 2007 peak.
As prices rose, the RSI moved into its overbought area, which in both 2007, 2021, and March 2022 cases preceded a correction of the earlier northward march. Very high levels of CCI were also a motivating factor for the bears to be active.
In addition, the Stochastic Oscillator has risen to its highest level since February 2011! When we look at the chart, we see that this was the moment before the very strong market reversal and sell-off, which suggests being very careful with buying at current levels because the bears will certainly see the opportunity to return - especially if we consider the other arguments that are shown in the charts below.
What do I mean? Let's look at the weekly chart.
As in the case of uranium, the CCJ has risen above the upper border of the blue triangle, and in the not-too-distant future, the bears may want to realize the gains made in the previous months (as a reminder, in this area, the minimum size of the upward movement will be equal to the height of the triangle, which from the point of view of technical analysis may be discouraging to realize profits).
This is especially true if we also take into account the fact that, not far from current levels, the size of the upswing would be equal to the size of the consolidation marked on the daily chart below in orange.
Additionally, when we look at recent price action, we see that buyers have reached two more short-term resistance lines: the red line of resistance based on previous highs and the upper border of the rising wedge. Many times, on many charts, this formation was strong enough to encourage the bears to return to the market.
If we add to this the invalidation of the tiny breakout above both mentioned resistance lines, the current position of the daily indicators and the increase (not significant, but still) in volume, the probability of reversal from here is very high.
When will the road to the lower levels be even more open?
When the bears drive the price below the bottom line of the blue rising wedge. Then the test of the September peak will be only a matter of time (and not very far away).
Summing up, while the bulls are undoubtedly benefiting from the new multi-month highs, the apparent negative divergences and indicator levels (in all timeframes) coupled with the proximity of the strong long-term resistance and the technical situation of uranium itself warrants extreme caution in making investment decisions, as hasty purchases may result in losses in the near future. Personally, I think only a confirmed breakout above the 2007 peak would make me consider this option. Until then, the risk of a reversal and correction of recent increases seems more likely.
Devon Energy Corp. – The Consolidation, the Triangle, the Channel and their Implications
Looking at the monthly chart, we can see that the stocks have stuck in the multi-month consolidation around the July 2022 low area - just below the 38.2% Fibonacci retracement based on the entire 2000-2023 upward move.
Given the pace of the previous several-year rebound, the correction is very shallow, which, combined with consolidation, shows that the bulls haven't lost their grip on the field to their opponents, which is a positive sign.
Looking at the recent correction from a slightly different perspective, we can see that last year's price action can be written in the triangle, which means that according to technical analysis, only the exit of the formation will indicate the direction of further movement (just like the exit of the consolidation marked on the monthly chart).
What interesting things can the daily chart tell us about the next potential move?
From this perspective, we can see that, despite the deep correction of the earlier upward move of last month, the price is still above the green price gap formed on 9 October, which is a positive signal.
In addition, the bulls managed to break through the upper border of the short-term red descending channel, which, combined with the buy signals generated by the CCI and Stochastic Oscillator, gives them further arguments to fight for higher levels.
The only problem here we can see is… the volume that has been falling during the recent upswings, but in my opinion, as long as the price remains above the gap and the channel, yesterday's downswing is nothing more than a verification of the earlier breakout.
If this is the case, and the bulls manage to hold the mentioned levels, another move to the upside may be just around the corner.
How high could the price go?
Unfortunately, there's a small problem here because not far from here, there is the nearest resistance zone based on the November 7th gap, last week's peak, and the 38.2% Fibonacci retracement based on the entire Oct. 18th - Nov. 16th downward move.
Summing up, I think the way to higher levels (in the short-term run) will open only after a breakout above the mentioned resistance area.
Finishing today's alert, I'd like to ask you all another question: Is there a time frame that is particularly important to you? I'm guessing that for stockholders, the weekly charts may be more important than the very short-term changes ;)
In the old Oil Trading Alerts, the main focus was on crude oil, and all positions were opened based on daily charts, which sometimes left readers with no positions for days.
This time, I'd like the new OTA to be as tailored to your needs as possible.
That's why it occurred to me to ask you if you're also interested in opening positions for just a few days? At this point, I'm thinking mainly of WTI, but swing trading for other instruments can also be interesting.
Would you be interested in that option?
I'd be very grateful for any comments or suggestions.
See you tomorrow.
Anna Radomska