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Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Major Turnaround in Crude Oil’s Price

Commodities / Crude Oil Jun 19, 2018 - 04:17 PM GMT

By: Nadia_Simmons

Commodities

Crude oil’s Friday’s huge daily decline was not followed by yet another daily slide, but by a profound reversal. The price has surely turned by 180 degrees, but can we say the same thing about the outlook for the following days?

No. The volume doesn’t support this outcome and as you’ve seen in the previous several days, indications and confirmations from volume are very important. In fact, the low volume was one of the key reasons that made us open the short position at $66.78 on Wednesday.


We wrote it many times before and we’re going to write it again – a reversal without significant volume does not indicate what it should. It doesn’t show a fierce battle that was won by one side on a decisive manner. It shows that there was a pause that looks like a reversal, but really isn’t one and definitely doesn’t have one’s implications.

Let’s take a look at yesterday’s price move and the corresponding volume level.

The volume was higher than what we saw during Friday’s decline, but it’s still low compared to what we saw previously this month. Compared to the last few days, the volume was average and compared to the past month, the volume was low. It was definitely not high. Therefore, there are no bullish implications of yesterday’s session, and even if they are, they are very insignificant.

The above chart features the USO ETF, which is a proxy for the price of crude oil. It’s also a proxy for its volume readings and the latter is the reason that we are featuring it today. The volume that we saw in USO yesterday was nothing to call home about and thus, there are no bullish implications of the upswing. It seems to be a breather within a decline, not the end thereof.

Moreover, please note that we don’t see such signal in case of crude oil, as far as the USO is concerned, we have a sell signal from the Stochastic indicator. This divergence has bearish implications.

Summing up, no market moves up or down in a straight line and periodic corrections are inevitable in all markets and it seems that we have just seen an example of this rule in case of crude oil. At the first sight, yesterday’s move may appear to be bullish as it looks like a bullish reversal. However, looking closely at the volume levels reveals that it was actually a pause that only looked like a real reversal and thus implications are not bullish. Consequently, the outlook remains bearish.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Oil Trading Alerts as well as Gold & Silver Trading Alerts. Sign up now.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
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Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


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