Opinion

The Road Ahead for Oil


Technical analyst Clive Maund charts oil and suggests that a commodities bull market may be brewing.

The paradoxical technical situation for oil that we highlighted in the last update has continued—and has gotten even more extreme. In that update we concluded that oil's very bullish volume indicators pointed to its continuing to advance, despite COT and Hedgers charts and sentiment indicators showing extremes that would normally call for a reversal to the downside, and that is what has happened.

We see on the 5-year chart for Light Crude that it appears to have broken out of its large Head-and-Shoulders bottom several months ago, but its advance since then has been hesitant and we cannot be absolutely sure that it has broken clear out of this potential base pattern until it has broken clear above its 2015 highs, which is the high following the completion of the Left Shoulder of the pattern. As with copper, that we looked at just yesterday, the strong volume towards the latter part of this pattern and the powerfully rising volume indicators suggest that a major bull market is starting, however, we have the conundrum of reconciling this with various indicators which are at extremes and pointing to an imminent reversal to the downside. Action that would reconcile what we are seeing both on the charts and on various indicators would be an intermediate or medium-term correction, followed by renewed advance taking the oil price to new highs.

 

On the 2-year chart for Light Crude we can see one big reason in the price pattern why it might reverse here into an intermediate correction—it has arrived at a significant trendline target in the $60 area.

 

Now we will proceed to look at the indicators which strongly suggest that oil will soon reverse to the downside. We start with its latest COT chart which shows Large Spec long positions at 1-year highs, and since these are the habitual bagholders, this is by itself an invitation for oil to reverse to the downside.

 

Click on chart to pop up a larger, clearer version.

Next we move on to the latest Hedgers chart which shows that Hedgers' positions are now at shocking bearish extremes that have almost always in the past led to a reversal to the downside quite soon after, even if oil makes limited further gains first.

 

Click on chart to pop up a larger, clearer version.

Chart courtesy of sentimentrader.com The latest Crude Oil optix, or optimism chart, shows that traders are wildly optimistic about the outlook for the oil price. At worst this is a sign of a significant top, and at best it means that a period of consolidation is usually needed before the price can advance further.

 

Click on chart to pop up a larger, clearer version.

Chart courtesy of sentimentrader.com

Finally, the seasonal chart for oil shows that seasonal factors are negative for this commodity in January, but much better in March and April, which supports the scenario for a near-term reaction followed by renewed advance later.

 

Click on chart to pop up a larger, clearer version.

Chart courtesy of sentimentrader.com

How this situation plays out now may now depend on how events unfold in Iran and what effect it has on both Iran's oil fields and its oil exports. Technically, the most probable scenario is a medium-term reaction, followed by renewed advance to new highs, which is also what the copper charts portend, and more broadly the action in both copper and oil suggests that a major commodities bull market is incubating, a big beneficiary of which will be silver.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.


Visit source site

https://streetwisereports.com/article/2018/01/02/t...

oil priceCommoditiesStreetwise ReportsLight Crude

More items from oilvoice


OPEC Pledges to Raise Production to Satisfy 100% of Target Cuts, Says GlobalData

Following today's announcement that participants at the 174th Meeting of the OPEC Conference in Vienna have collectively agreed to increase production to 100% of targeted cuts, Joseph Gatdula, Senior Analyst for Oil & Gas at GlobalData , a leading data and analytics company offers his view on w ...

OilVoice Press - OilVoice


Posted 1 day agoOpinion > OPECProductionOil +2

Vattenfall and AREG to Share Renewables Opportunities at Subsea Seminar

UK subsea companies are set to be given an insight into supply chain opportunities for the European Offshore Wind Deployment Centre (EOWDC) ahead of the project going live later this summer. Those attending the lunch and learn at The Village Hotel in Kingswells on Tuesday (June 26), will also hear ...

OilVoice Press - OilVoice


   


Posted 1 day agoEvent > United KingdomUKvattenfall +4

Ørsted Wins 920MW Offshore Wind Projects in Taiwan

aiwan's Ministry of Economic Affairs has announced the outcome of its first offshore wind auction. Ørsted was awarded 920MW capacity for its offshore wind sites in the Changhua region. Subject to Ørsted obtaining relevant permits and taking final investment decision, the projects are to be built in ...

OilVoice Press - OilVoice


Posted 1 day agoPress > OrstedOffshorewind +3

Oil Company Additions to Proved Reserves in 2017 Were the Highest Since 2013

Source: U.S. Energy Information Administration, based on Evaluate Energy Note: Rest of world includes associated companies' reserves with unspecified geographies. In 2017, a group of the world's largest publicly traded oil and natural gas producers added more hydrocarbons to their resource b ...

OilVoice Press - OilVoice


Posted 1 day agoOpinion > EIAEnergy Information Administration EIAUnited States +6

88 Energy Limited Operations Update

88 Energy Limited (ASX: 88E) (“88 Energy” or the “Company”) is pleased to announce the following update for its projects located on the North Slope of Alaska. Highlights Nitrogen lift continues at Icewine#2 Project Icewine – Icewine#2 Production Testing As at 1730 21st June (AK time), the f ...

OilVoice Press - OilVoice


Posted 1 day agoPress > 88 EnergyOperations UpdateASX +5
All posts from oilvoice