Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Crude Oil Price Rally to $50?

Commodities / Crude Oil Nov 22, 2016 - 05:40 PM GMT

By: Nadia_Simmons

Commodities

Trading position (short-term; our opinion): Long positions (with a stop-loss order at $41.39 and initial upside target at $49.53) are justified from the risk/reward perspective.

On Friday, crude oil moved higher once again as optimism over an OPEC deal to limit production continued to weigh on investors' sentiment. In this environment, light crude gained 0.83% and closed the day above the 38.2% Fibonacci retracement. What does it mean for the commodity?


Let's examine the charts below and find out (charts courtesy of http://stockcharts.com).

Quoting our Friday's alert:

(...) oil bulls pushed the commodity higher as we had expected. With this increase light crude reached the previously-broken 50-day moving average, which in combination with the 50% Fibonacci retracement triggered a pullback. Despite this drop, crude oil closed the day above the last week's high, which looks like a verification of earlier breakout. If this is the case, light crude will extend gains (...)

From today's point of view, we see that the situation developed in line with the above scenario and crude oil rebounded, climbing above the 38.2% Fibonacci retracement and closing the day above the Nov 9 high. This suggests that Friday's verification of a breakout above this peak and its positive impact on the price will support oil bulls and trigger further improvement in the coming days.

How high could the black gold go in the coming days? We believe that the best answer to this question will be the quote from our previous alert:

(...) we'll see (at least) a re-test of yesterday's high. Nevertheless, taking into account the fact that buy signals generated by the indicators remain in place, we think that higher prices of crude oil (even an increase to the previously-broken red and black resistance lines) are very likely – especially if the black gold closes this week above the last week's high (in this case we'll see a bullish engulfing pattern on the weekly chart).

This pro-growth scenario is also supported by the current situation in the oil-to-stocks ratio.

On Friday, we wrote:

The first thing that catches the eye on the weekly chart of the oil-to-stocks ratio is invalidation of a breakdown under the 50-week moving average, which resulted in a rebound and a comeback to the blue consolidation.

What impact did this move have on the daily chart?

(...) the ratio came back above the 200-day moving average and the green support zone (invalidating earlier breakdowns), which in combination with buy signals generated by the indicators continues to support further improvement in the ratio and also in crude oil (as strong positive correlation remains in place). Additionally (similarly to what we wrote in the case of crude oil) if the ratio closes the week above the last week's high we'll receive one more pro-growth factor – a bullish engulfing pattern.

As you see on the above charts, the ratio closed the previous week above the Nov 9 high, which resulted in a creation of the bullish engulfing pattern (as we had expected). Additionally, invalidation of earlier breakdowns and its positive impact on the bulls is still in effect, which supports higher values of the ratio and crude oil in the coming week.

Summing up, crude oil increased above the 38.2% Fibonacci retracement and verified earlier breakout above the early Nov high, which in combination with the current situation in the oil-to-stocks ratio and buy signals generated by the indicators (in the case of crude oil and also in the ratio) suggests that higher prices of the black gold are just around the corner.

Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Long (already profitable) positions (with a stop-loss order at $41.39 and initial upside target at -$49.53) are justified from the risk/reward perspective.

As a reminder – "initial target price" means exactly that – an "initial" one, it's not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we've done previously). Stop-loss levels, however, are naturally not "initial", but something that, in our opinion, might be entered as an order.

Thank you.

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

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing list today

* * * * *

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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in