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Crude Technical Trend Analysis : Range bound trade expected – 11March13

, March 11, 2013, 0 Comments

Range bound trade is expected, Bullish traders needs to be cautious.
From the daily Brent crude oil price chart, it can be observed that Brent crude oil price after a breakout from the horizontal uptrend line on 8th February 2013 made a half-yearly top of 119USD and came then fell down to 112USD a barrel on 6th March 2013.

Technically Brent Crude made a yearly high of 128USD in February 2012 & but then crashed to low of 89USD a barrel in July 2012. From there Brent crude did a U-turn and started gaining in price by scaling up to 117USD around September 2012, and from then on the daily trend were sideways with a forceful breakout happening on 2nd January 2013 taking the price to 119USD. Fundamentally a stronger dollar has been putting pressure on the crude oil prices though.

Technically as observed in the daily Brent crude chart a horizontal down trend line has been drawn by connecting the peak prices from high of 128USD. Since late September 2012 Brent crude has been trading sideways within the price range of 117-105USD & the horizontal down trend line has been acting as resistance to Brent crude price on the upper side.

The middle January 2013 the Brent Crude breakout on the upside and subsequent high of 119USD caused an instant scare in international crude oil prices. Such technical breakouts are important & very significant as they hint at the underlying bullish tone.

A 18sma (blue) can be observed acting as support/resistance for short term  prices trend  to Brent crude prices, while 200sma (pink) an extremely reliable moving average acting as support/resistance to  a long term trend to daily Brent crude prices. The momentum indicator KST often spots the dominant trend in the prevailing trend cycle, which has been hinting at an uptrend in Brent crude counter.

A Strong breakout on the upside in Brent crude prices  coupled with a crossover in KST indicator to overbought zone hints at a very strong bullish tone in Brent crude. Bulls are very active in Brent crude oil counter.

In India at the Multi commodity exchange-MCX the crude traded in Indian rupees. MCX Crude in the daily time frame it’s, own trend analysis and presented/technically analyzed here in this article. The MCX Crude daily chart shows a price trending perfectly in a horizontal down trend channel, daily time frame trend tilt is towards downside. The trend channel is a perfect & simplest technique is to trade with the prevailing/existing trend.

In fact in MCX crude counter trades can be taken very easily as crude prices are perfectly well modulated within the support and resistance area in the down trend parallel channeled trend lines. The reclining peaks in MCX crude are 5630, 5450, & 5300 act as a future price resistance, while future price support is at 4465, 4990 & 4617.

The moving averages 34ema & 50 sma are acting as support &resistance to daily MCX crude prices. The 34ema & 50 small crossovers have almost given perfect trend reversal of price change within the downtrend channel every time as can be observed in the above MCX Crude daily chart. The 34ema&50sma death crossover and fall of 5300 has given the upper hand to bears.

The momentum Indicator RSI is below 40 means in oversold zone, so bottom in price will follow sooner than later. The fall though seems stalled but may be temporary.

Technical conclusion: “A rally within the MCX Crude as can be observed from 4682 to 5248 has been on declining volumes. Negative divergence in momentum indicator, declining volumes on price rise make a case for reversal in near period in MCX Crude. Bullish traders need to be cautious.” Has indeed come true!

Bullish traders need to protect their longs, and bearish traders need to judge the technical landscape before taking new shorts.

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Disclosure: I wrote this article myself, and it expresses my own opinions.I have no positions in Brent/MCX Crude and no plans to initiate any positions within the next 72 hours.

About author
Suchita holds a Bachelor of Science Degree from MSU University, Baroda, Diploma in Financial Management from Xavier's Institute of Management, Mumbai and has undergone Comprehensive Program on Technicals Analysis from Bombay stock exchange. ...more