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Tuesday, March 15, 2016

WTI and Brent Crude Oil charts: sharp bear market rallies coming to an end

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude oil shows a splendid gain of 50% from its Feb '16 low that raised bullish hopes of an end to the long bear market.

Speculation that Russia, Saudi Arabia, Kuwait, Qatar and Venezuela will cut their output, and falling US shale oil production had sustained the month-long rally.

Continued Iraqi production and Iran's decision to increase output to pre-sanction levels have deflated bullish hopes. If the rally continues towards 50, US shale oil production may revive and add to record high inventory levels. 

Daily technical indicators have started to correct overbought conditions. RSI and Slow stochastic failed to touch new highs with oil's price on Fri. Mar 11. The negative divergences may lead to a correction towards 34.

On longer term weekly chart (not shown), oil’s price closed above its 20 week EMA for the first time in more than 5 months, but is trading below its falling 50 week and 200 week EMAs. Weekly MACD and RSI are in bearish zones. Slow stochastic has reached the edge of its overbought zone. The long-term bear market is far from over. 

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude oil rallied past its 50 day EMA, gaining more than 50% from its Jan '16 low of 27, but fell short of the 42 mark.

On Mar 8 '16, oil's price formed a 'reversal day' pattern (higher high, lower close), backed by strong volumes, and slid down below 40.

All three daily technical indicators are showing downward momentum. MACD and Slow stochastic are inside their respective overbought zones. RSI faced resistance from the edge of its overbought zone.

A correction towards 36 appears likely.

On longer term weekly chart (not shown), oil's price closed above its 20 week EMA for the first time in more than 9 months, but is trading below its falling 50 week and 200 week EMAs. Weekly MACD and RSI are in bearish zones, but Slow stochastic is about to enter its overbought zone. The long-term bear market remains in force. 

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