Success of Oil Bulls or Premature Joy?
On the one hand, the Monday session can be considered a very successful one. The white candle urges you to make investment decisions now. But what is the other side of the coin, and what are its implications for the nearest future?
Crude Oil – Is It Time to Celebrate?
From this perspective, we see that yesterday’s increase took the price of black gold above the previously broken green rising line, which “invalidated” the earlier breakdown.
Positive sign? Yes, but only at first glance.
Why? Because the week has just begun, and it's hard to take yesterday for granted – especially when we consider the fact that WTI moved to the previously-broken late August low and the 50-week moving average, which serve now as the nearest resistance area.
Therefore, in my opinion, as long as we don’t see an increase above it, all moves can be nothing more than a verification of the earlier breakdown.
Is that really going to happen? Don't the bulls have cause to celebrate, and they're about to take another ride down?
Let’s look at the daily chart for clues to help us answer these questions.
The first positive thing that catches your eye on the above chart is the breakout of the red declining resistance line based on the peaks formed in late October and early November.
At the same time, it's the upper border of the declining wedge, which suggests that continued growth may be just around the corner - especially if we add in the buy signals generated by the CCI and the Stochastic Oscillator.
Unfortunately, all the good humor is spoiled by yesterday's volume, which was much lower than Friday's session, and the neighboring 200-day moving average, which, combined with last week's peak, forms the first resistance zone.
What might that mean for buyers?
In my opinion, there’s an increased risk of returning south and at least testing the strength of the support-resistance line broken yesterday. If the bulls have indeed recovered from last week's bear attacks, they should have no problem maintaining this close technical support.
What bull scenario could we consider then?
The first target for buyers would certainly be the upper border of the red descending channel (currently around $83.21). If they were able to move above it the way to around $88.67, where (at the moment) the range of the upswing is equal to the height of the red declining wedge, could be open.
If, however, there was a reversal first (the above-mentioned verification of yesterday’s breakout, which is a very classic technical development of events after the breakout) the rebound could take the price to slightly lower levels – around the 61.8% Fibonacci retracement and the peak formed on October 27.
Summing up, I think that very careful observation of the behavior of the bulls in the upcoming session(s) will allow us to choose the most favorable place to open a position.
Natural Gas – Time for Post Double Bottom Rally?
In the OTA published on November 15th, you could read the following:
What, then, can we expect in the time ahead? How low can the price go?
In my opinion, the first target for the bears will be the previously broken 50-week moving average (currently at 2.92). If it bends under the pressure of the sellers, it is necessary to take into account the deepening of the falls even to the lower border of the green rising channel.
(…) Nevertheless, since April, the lower line of the green rising trend channel has been acting as a pretty solid support, which is encouraging buyers to come back. (…)
From today’s point of view, we see that the situation developed in line with the above scenario and natural gas slipped to the 50-week moving average in the following days. At the same time, we could also observe a test of the lower border of the green rising trend channel.
Although the sellers managed to close the week under this line (a negative sign from a technical point of view) the bulls didn’t give up and attacked yesterday. As a result, natural gas invalidated earlier breakdown – similarly to what we saw at the beginning of September, creating a green gap, which serves now as the nearest support.
Does yesterday's price action look positive? Yes. However, we must not forget the fact that yesterday's rising candle was shaped at a seemingly lower volume than the preceding falling candles, suggesting a lower level of buyers' involvement than might be assumed at first glance.
What does that mean for the price?
In my opinion, the bears may want to test the resolve of their opponents and attack during the next few sessions – especially when we take into account mixed signals from the daily indicators.
If this is the case, their first target will again be the lower border of the green rising trend channel and the lower line of the green gap just below it (the support area round 2.995-2.960).
Nevertheless, at this point, it is worth noting the bulls have a potential strong pro-growth formation - a double bottom on their side (of course, if they manage to keep it up for the next few days), which could translate in a significant move to the upside in the coming week(s). In this case, it would be reasonable to consider opening long positions.
And now, at the request of our community members, an update on the analysis of the companies that appeared in the Oil Trading Alert last week. Let's start with BP.
BP – Closed Gap or Deja-vu?
Looking at the daily chart, we see that although the buyers managed to close the first red gap during yesterday’s session, the overall picture hasn’t changed much. Why? Because we saw similar price action last week. The bulls closed the gap last Tuesday, but didn’t manage to hold gained levels, which translated into another sharp move to the downside.
In the following days stocks reversed and rebounded, creating two green pro-growth gaps (that will serve as the nearest supports), but the volume that we observed during the rebound is definitely disappointing, which suggests that another move to the downside can’t be ruled out – especially when we take into account the nearest important resistance zone and the medium-term picture:
(…) there's also an open gap (…) strengthened by the 200-day moving average and the 50-day moving average, as well as decreasing volume despite the price increase. This suggests that the buyers' involvement may not be as high as it might appear at first glance.
From the broader perspective, however, the overall situation in the medium term also hasn’t changed much as stocks remain under the long-term green support line and the 50-week moving average, which means that the last commentary is up to date also today:
(…) the sellers have managed to break below the long-term green support line, which in the classic view of technical analysis is not a good thing.
In addition, as in the first half of last year, BP has dipped below the 50-week average, which, combined with the sell signals generated by the CCI and the Stochastic Oscillator, may lead bears to further tests – the blue support zone based on the May and June lows (…)
Summing up, is this a good place to buy? Personally, I'd hold off on spending the money to buy stock in this place.
Exxon Mobil – Breakout! But What’s Next?
Quoting the Thursday alert:
(…) the combination of the red gap and the short-term red declining resistance line was strong enough to stop their march northwards.
As a result, the price reversed yesterday, which triggered the move to the downside. Although there is a positive divergence between the price and the CCI, and the buy signal remains in the cards, the sellers have more arguments on their side - not only the strong resistance zone mentioned above but also the volume accompanying the shaping of yesterday's candle.
This is clearly higher than what we could see during the last upward correction, which shows a greater commitment of the bears. On top of that, both indicators turned south, which will probably result in the negation of earlier buy signals.
What does it mean for the price?
In my opinion, during the next session(s), we will see a test of the medium-term green rising support line based on the previous lows formed in mid-March and mid-June 2023. (…)
From today’s perspective, we see that the bears actually showed their claws and tested the strength of the medium-term support line.
Despite their attack and formation of another pro-bearish gap, the bulls did not give up and very quickly and decisively entered the floor using not only the aforementioned support, but also the bottom line of the short-term wedge (marked in black) and the buy signals generated by the CCI and the Stochastic Oscillator.
As a result, a large white candle was created on Friday at a significant volume, which had several positive implications:
First, Friday's rise helped close two gaps that served as the bears' closest defences.
Secondly, the upper border of the black wedge has been broken, suggesting that further increases may be just around the corner.
Thirdly, the short-term red bearish resistance line (based on the September and October peaks), which was strong enough to stop buyers at the beginning of this month and trigger further declines, was also broken. This is a big success for the bulls, which increases the chance of further price increases, especially if we add to this the buy signals generated by the indicators.
How high can the stocks go from here?
Given the exit from the declining wedge, the first target for buyers may be around 108.73 (I've marked this area with a blue rectangle).
This area is slightly above the first major technical resistance zone created by the 38.2% Fibonacci retracement (based on the entire September-November downward move) and the early-November high of 108.20.
Summing up, in my opinion, before we see such price action, the bears will most likely verify the previous breakdowns (which would be a very technical move on their part). If the bulls don't back down and respond with force, I think it's worth considering opening long positions in this area. It's certainly worth keeping an eye on Exxon Mobil's stocks and the competition between market participants.
In closing today's alert, I'd like to thank you for all the ideas for analyzing that have been submitted by members of our community. Tomorrow, I'll have a special for you: Cameco Corporation, Devon Energy Corporation and a something completely new – the uranium analysis.
See you tomorrow.