Join Dstockmarket's Community - Daily Market Analysis, Individual Stock Analysis.
If you trade oil or own oil stocks, it is important that you keep track of where oil prices might go. Here, I will use technical analysis to see what is oil's next move.
I normally only analyze the 3 major index.
The Dow Jones, the S&P 500 and the Nasdaq.
Occasionally, I will do an analysis of oil. I have started some chronological analysis of stocks and I felt it was very beneficial for myself, my readers and friends. So, I have decided to take on the challenge and analyze oil. Commodities are not my strong point in analysis but I felt that I should deepen my knowledge on it as well.
I have done an analysis on oil back in December 2017 stating that oil prices might go to $80 in 2018. Oil Prices Might Rise To $80 In 2018. So far oil prices is still in an uptrend. So oil could really touch $80 in 2018.
I will update this page as time goes by, so if you are looking for an updated analysis you can spot it by checking out the LATEST tab on my website and press the refresh button to get the new analysis.
Oil prices is breaking out of another box. Albeit a smaller one.
As you can see from the 60 min chart of Crude oil below, the trend is still up. So lets continue to follow the trend and be bullish.
Well, some time ago which is last year I did an analysis and said oil might go to $80. It did not. Oil prices rose but it went up to about $77. Sometimes analysis can fall short by a margin. I suppose $3 short is not too big a margin. Anyway traders should be selling on the way up not at a specific point.
It has been about 8 months since I last wrote on oil.
Since then the oil market has crashed and then bottomed and now is on its way up again.
What's in store for oil? Let us take a look at the charts.
The chart above is the weekly chart of oil futures. The colorful thing is the fibonacci retracement of the entire fall. Currently oil is at the 38% retracement. Next resistance will be the 50% area.
Notice how oil formed a doji at weekly support and quickly bounce back up. Simple support and resistance analysis plus candlestick can often help spot reversals.
One thing to note about this chart is the many tails formed in recent weeks.
This tells us that despite overhead resistance, oil is refusing to go down.
The daily chart provides a clearer picture.
Once it broke above the steep downtrend line, it was a buy signal. It also forms a variation of the reverse head and shoulders. Not quite the pattern but it does give traders some bullish bias.
I have drawn a box around the recent price action. There is also a bullish cross.
Take note of the box. As long as oil prices can stay above the lows of this box, then oil prices will likely move up to the next area of resistance which is the 200 MA.
This will be good for oil stocks.
When we study and analyze a chart we must never forget what trend it is in that particular time frame. Take a look at the chart of oil below and you will realize despite the ups and down, the commodity is still in a nice uptrend in the daily chart. A clue to spot it is to look at the nice rising 20 MA and 50 MA and 200 MA. A picture of bullish uptrend.
Oil is struggling a bit in the 60 min chart. Recently it broke an uptrend line and is now trying very hard to find support. Have drawn the box area and if oil drops below this box there might be some selling in the short term time frame.
The last time I mentioned that we should continue to be bullish on oil if it manages to stay above the 60 min 20 MA. That is a simple short term trend following tool.
If you notice, oil prices failed to breakout higher and it slashed through the 20 MA. This hinted of weaknesses and oil prices have fallen after that.
Oil is now at a support area which I have highlighted in green color. It is also touching the 60 min 200 MA. If oil can find support at this area and then trade back above the downtrend line then it may continue to move higher. If it cannot find support there then there will be more selling.
After breaking above a 60 min downtrend line, oil prices had a nice rally up. As it moves back above the 60 min 20 MA and 50 MA, oil is now in a nice 60 min uptrend.
Today oil prices broke above a 60 min box so oil prices may continue to go higher. As long as oil stays above the rising 60 min 20 MA, we should continue to be bullish short term and look for bullish continuation patterns.
After suffering a decline in prices, oil has found support at daily price support. It is no in a 60 min uptrend. I have not been able to update things about oil prices but I did do analysis on it and posted them in my Telegram Group. I shall try to make frequent posts on oil
The chart above shows the 60 min chart of oil prices. As you can see, oil prices were in a downtrend for quite some time. It was only recently that it broke above a 60 min box and went above the 50 MA. This is a first sign of trend change. Oil prices has already made a higher low when a bullish engulfing pattern formed and send oil prices higher.
It may look like it is forming a 60 min ascending triangle. If oil can break above this pattern then it may go higher soon. So do watch the horizontal line carefully for a breakout. On the other hand, if oil prices break below the uptrendline and also the 50 MA, then it might go back down.
First of all I would like to apologize for not being able to update oil analysis as frequently as I do with the 3 major indexes. That's because I do not trade oil that often. And even when I do, I use the USO.
Much has happened since my last analysis but oil is still in a daily uptrend.
As you can see from the daily chart of oil above, it corrected to the rising 20 MA and price support and bounced up. So far the daily trend in oil is still up and therefore, the trader should continue to remain bullish on oil till the trend changes.
When we zoom into the 60 min chart of oil, we can see a whole lot of "Kung Fu" fighting in oil. These are what we call volatility and as you all know volatility is a traders friends because that is where they can make money. As with Kung Fu, only the most skilled come out of it unhurt.
Oil formed a double top, broke a trendline and proceeded to correct lower. Those who were observant could have made some money shorting oil.
Then oil broke above a downtrend line as it met the daily 20 MA. This provided a catalyst for it to go higher. Recently it broke above a 60 min box. If oil prices can stay above this box, it will continue to move higher.
As you can see from the daily chart of oil below, oil prices are trending higher nicely in the daily chart.
The principle of trend following is simple:
By the way I use the CL to analyze oil. It is the Crude Oil WTI Futures.
Oil has long started a new uptrend. It did so by making higher highs and higher lows and going back above the 20 MA and 50 MA in the daily chart.
Right now, oil is staying nicely above the rising 20 MA and 50 MA. You should continue to be bullish on oil prices as long as it stays above these 2 moving averages. It just a simple trend following method that I use. You can use any MAs that you like.
Recently it broke above an ascending triangle pattern. This is bullish and it is a continuation pattern. Which is why you see oil prices going up.
Oil prices also broke out above a short term high and that area will now act as a short term support for traders to look at.
I just want to show you the monthly chart of the US Dollar index.
Most of us know that a falling US Dollar is beneficial to commodities, especially oil and gold. You can see how the US Dollar index has fallen a lot. Do note that it is falling to a support area which is why a target of $80 is quite reasonable considering the intermarket relationship between the Dollar and oil.
I do not want to anticipate beyond $80 at the moment as its not good to count the chicken before the eggs hatch. We will look at it again as the days go by and study the intermarket relationship once more when the time comes.
The chart above is the monthly chart of oil.
Oil is very important to the world economy.
So, what we want is to avoid both extremes. Oil prices that are neither too low and neither too high will provide the perfect balance that will be the catalyst for world economic growth.
In my opinion, oil prices that are below $90 will still sustain an economic growth around the world. But anything too high, we will have to start to be very concerned. Unless the US Dollar drops so much that any gain in oil prices is actually not any gain at all since the purchasing power of the US dollar has drop. The higher oil price only reflects that.
What you can see in the chart above is oil has broken out of an immediate resistance. There is strong resistance around the $80 area. So at this moment where oil is, there is a window of opportunity for investors and traders.
Yes, it is going to be good for oil stocks and most things oil related. You can trade the oil futures, or invest in the USO of any oil etf or you can buy oil related stocks. This is the moment to trade and invest in oil stocks.
But always remember one thing if you buy oil stocks:
Always buy oil stocks that are in an uptrend. If you try to bottom fish an oil stock that is in a downtrend, you are really asking for trouble.
If oil prices have already risen so much and other oil stocks have already started an uptrend and your oil stock is still in a downtrend what does that mean?
Oil is going up but your stock is still down hints of serious issues and problems with the stock.
On the other hand, if your oil stock is in an established uptrend, then all you need to do is to buy the dips and the breakouts.
Lastly I would like to show you the 60 min chart of oil.
As you can see, the smaller time frames hinted of higher prices. There were 2 ascending triangles that appeared in oil. Which is why we see higher prices recently.
It is best to remain bullish short term as long as oil is above the 60 min rising 20 MA and 50 MA. I have drawn a box over the price and that is an area to watch for short term traders.
If it drops below the box, then there will be some minor correction. A sideways consolidation and breakout will send oil prices higher once more.
Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com
Charts with the investing.com logo are courtesy of Investing.com powered by Trading View
Nov 23, 20 09:05 AM
After breaking out of a downtrend line, the S&P 500 still looks bullish for the near term.
Nov 17, 20 05:26 AM
After the news of Tesla being added to the S&P 500, it is gapping up pre-market.
Nov 09, 20 06:56 AM
After the elections, the S&P 500 is now breaking out of a triangle pattern.
Oct 23, 20 08:22 AM
The US stock market seems to point to a Republican victory. It is still in an uptrend and therefore we should continue to remain bullish.
Jul 13, 20 07:44 AM
Here is a technical outlook for the US stock market.