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

Crude Oil Stocks - For the Bulls or Bears?

Commodities / Oil Companies Apr 11, 2016 - 06:02 PM GMT

By: Nadia_Simmons

Commodities

In the previous month, crude oil extended gains and climbed above the barrier of $40. Despite this improvement, the combination of resistance levels encouraged oil bears to act, which resulted in erasing 40% of the previous upward move. What happened at the same time with oil stocks? What's next for the XOI? Let's jump right into charts (chart courtesy of http://stockcharts.com ) and find out what can we infer from them about future moves.


Let's start today's article with the long-term chart of oil stocks.

In our previous Oil Investment Update, we wrote that the XOI had invalidated earlier breakdown under the previous lows and the 200-month moving average, which suggested further improvement and an increase to the previously-broken black resistance line around 1,070. Looking at the monthly chart from today's point of view, we see that the situation developed in line with the above scenario and oil stocks almost touched our upside target. Despite this improvement, oil bulls didn't manage to push the XOI higher, which resulted in a reversal earlier this month. As you see, the index gave up some gains, which suggests that the recent upward move could be just a verification of earlier breakdown under the black resistance line. If this is the case, we may see declines in the coming month and a re-test of the 200-month moving average. At this point, some of you may ask: what about buying signals generated by the CCI and Stochastic Oscillator? As you see on the monthly chart, we saw similar signals at the beginning of Feb 2015. Back then, they didn't trigger significant upward move and, from today's point of view, increases between Feb and May were just a correction of earlier downward move. Therefore, in our opinion, they are not reliable enough.

But are there any other factors that could encourage oil bears to act? Let's examine the weekly chart and find out what can we infer from it.

From this perspective, we see that the recent upward move took oil stocks to the red resistance line based on the late-Dec high. As you see it was bigger than correction between Dec 2014 and Apr 2015, which suggests that the index might create a wave 4 in a 5-waves downward trend (according to Elliott wave theory ). If this is the case, further declines in the coming weeks should not surprise us - especially when we factor in sell signals generated by the Stochastic Oscillator. Is it more reliable than monthly indicator? In our opinion, it is, because all sell signals generated since 2014 preceded sizable downward moves, which increases the probability that we'll see similar price action later this month.

Will the very short-term picture confirm this scenario? Let's check the daily chart.

On the very short-term chart, we see that oil stocks rebounded and increased to the 61.8% Fibonacci retracement and the late-Dec high. This resistance zone encouraged oil bears to act, which resulted in a drop to the bottom of the early-March pullback. As you see, this support triggered a rebound in recent days, but despite this improvement, oil stocks remain in the blue declining trend channel. What's next? When we take a closer look at the chart, we can notice a potential head and shoulders formation. This means that a breakdown under the green zone could result in a drop to around 950, where the size of the move will correspond to the height of the formation (in this area is also the Feb 24 low). Nevertheless, we should keep in mind that the CCI and Stochastic Oscillator generated buy signals, which could encourage oil bulls to act - similarly to what we saw in late-Jan. If this is the case, and the XOI rebounds from here, we'll likely see a test of the March high and the 200-day moving average in the coming days.

Summing up, oil stocks pulled back to the first support zone, which could trigger a rebound (especially when we factor in buy signals generated by the CCI and Stochastic Oscillator) to the March high and the 200-day moving average in the coming days. Nevertheless, even if we see such improvement, we should keep in mind the long- and medium-term picture, which suggests that further deterioration in the second half of the month is very likely.

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