Uranium – Bulls! Where Are You?
In the last few days, the oil bulls have finally shown that they haven't lost their horns and are ready to fight for higher levels. Unfortunately, we can't say the same for uranium, where the bulls' involvement has led to important changes in the technical picture. What could this lead to in the days ahead?
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To help you see what's changing, I'll start today's Oil Trading Alert with the free version (yes, the one in blue). Rest assured, our premium members will continue to enjoy the full spectrum of our alerts.
Exxon Mobil – Triangle vs. Support Line
Looking at the daily chart, we see that despite the earlier success and the exit from the declining wedge, bulls quickly lost their enthusiasm for buying and bowed at the first resistance – the 38.2% Fibonacci retracement based on the Oct. 19- Nov. 16 downward move. This led to a correction and verification of the earlier breakout above the upper border of the declining wedge and the short-term red declining resistance line.
As I mentioned in the summary of last week’s comment, it's a fairly typical behavior that shouldn't be a cause for concern, only if the previously broken lines are defended.
In the case of Exxon Mobil, the bulls won a battle fought in this area. Everything looked quite encouraging (including the buy signals generated earlier by the indicator), and the price turned north.
And here, unfortunately, the buyers were disappointed once again.
Although the bulls won a white candle on Nov.24, it has a long upper shadow and was formed on a very small volume (!!!), which didn’t bode well for the bulls.
It didn't take long to see the results. Despite repeated attempts to break through to higher levels, the daily highs continued to fall, prompting the bears to attack during yesterday's session.
What did that lead to?
First of all, to form a large red candle, which closed below the lower border of the blue triangle, suggesting that another bear attack might be just around the corner.
Why? Because triangles are inherently continuation formations. The movement preceding the pattern was to the south, suggesting that the bulls may have problems during the next sessions - especially when we factor in the volume, which unfortunately for the stockholders, increases during the declines.
How low can the price go?
If the bulls fail to maintain their main ally - the medium-term green support line based on previous lows (as seen more clearly on the weekly chart below), the road to at least 98.50 will likely be open.
Because in this area, the downward move will be equal to the height of the blue triangle, which, according to technical analysis is the minimum range of the move after breaking out of the formation.
However, let's keep in mind that such a dark scenario can only play out if the bulls do not show the will to fight and fail to maintain the aforementioned medium-term green support line based on previous lows!
Yesterday's session was another test for it and ended with a rebound (yup, stocks closed the day above this key support), which gives us hope for a bullish intervention.
Summing up, the suspicious “strength” of the bulls attracted the bears, who attacked during yesterday's session. It resulted in a daily closure below the lower border of the triangle. This is a negative sign, which, in combination with the increasing volume during declines, increases the risk of further declines. Nevertheless, in my opinion, the key to the future of the stocks, at the moment, is the medium-term green support line based on previous lows. If it holds, a reversal and the test of the upper line of the blue triangle is very likely. However, if the bulls fail, the way to around 98.50 will likely be open.
Technical Picture of Crude Oil
Let's start today's analysis with a quote from yesterday's OTA:
Crude oil closed Monday's red gap and rose to an intraday high of $77.02. It’s a very interesting level. Why? Because in this region, there's a blue dashed line, which could be the neckline of the potential pro-growth formation (…) – the reverse head and shoulders pattern. Please keep in mind that it’s only potential as the price of black gold is still trading under the blue declining dashed line, which could be a neckline of the formation.
(…) Taking all the above into account, it seems that further improvement might be just around the corner. Nevertheless, please keep in mind that the pro-bullish scenario will be more likely only if the bulls manage to push crude oil above the blue line and confirm the reverse head and shoulders formation.
Looking at the chart from today's perspective, we see that the situation developed in accordance with previous forecasts, and the buyers moved north during yesterday’s session. Thanks to their involvement, the price rose above $77, closing the price gap formed on November 24. In this way, the bears lost another ally who could stop their rivals.
In addition, the bulls have closed the day above the blue dashed line – the neckline mentioned in the last few articles, suggesting that the formation has entered the trading floor and further improvement may be just around the corner.
In my view, further confirmation of the bullish momentum will be the price increase above the upper line of the orange consolidation (marked on the daily chart) and an increase above the 200-day moving average and the recent highs.
If we see such price action, the way to the upper border of the red declining trend channel, the 50% Fibonacci retracement (based on the entire Sept.-Nov. downward move), or even to late Oct. peaks around $85 might be open.
Did yesterday's increase affect the weekly chart in any way? Let's see.
From this perspective, we see that the price action observed during the last sessions has resulted in a return not only above the lows formed at the end of August, but also above the previously broken medium-term green line.
Today, this seems to be a very optimistic sign, but let's remember that such events only gain credibility when the week is closed above technically important levels (or, as in our case, resistance).
Both the CCI and the Stochastic Oscillator generated buy signals calling for bulls to move forward, but for celebrations I would have waited until Friday's close and only then assessed the significance of the changes.
Before we summarize this part, I'd like to share with you the four-hour chart that shows the behavior of today's market participants before the U.S. session begins.
The first thing that catches the eye on this chart is the breakout above the Nov.20 high and the rise to the next resistance zone based on the Nov.14 peak and the 38.2% Fibonacci retracement. It's a pretty strong combination that could lure the bears onto the trading floor, especially considering the current CCI and Stochastic Oscillator levels.
As you can see, they've risen back to their overbought areas, which raises the risk that a reversal and correction in growth from recent sessions could occur in the very near future.
What makes me so suspicious? Because we've seen this kind of price action many times in the past (I've marked it in orange).
What does that mean for the price of black gold?
Most likely verification of yesterday's breakout above the neckline of the reverse head and shoulders formation, which is pretty typical post-breakout behavior and shouldn't be too much of a concern, of course, as long as that line holds, and the bulls want to fight for it.
Summing up, the undeniable successes of the bulls in the last few sessions are encouraging and raise the likelihood of a further march north. But before we see such price action, there's a chance that we'll first witness a reversal and a verification of yesterday's breakout above the neckline. If the bulls come out victorious in this area, the pro-growth scenario will be even more likely.
URA Global X Uranium ETF – This is a Bull Alarm!
Before we focus on the current price action, let's recall a previous comment on uranium:
(…) buyers started to gain strength, consolidating in the area of 24.45-26.99. It was a very good decision, which discouraged the sellers from attacking, which contributed to the next upswing, which in mid-November raised the uranium above consolidation.
What does that mean? From a technical point of view, such price actions usually translate into further increases - at least to the level which corresponds to the height of consolidation. So, for uranium, that would be a minimum of 29.53, which means there's still room for growth.
(…) And that's where the problem arises - in the form of a strong resistance zone and level 30 and its potential breakout.
All the indicators marked on the chart show clear divergences at the moment, which is not good for the bulls (…)
Looking at the chart, we can see that the warning signals sent to the bulls by both the red resistance zone and the divergences were also spotted by the bears, who decided to take advantage of the technical situation and fight for lower levels.
This week, they showed their claws, resulting in the price falling below its peak of Sept. 25, 2023, and its peak of Apr. 11, 2022. In this way, sellers invalidated the earlier breakout above these peaks, which doesn't bode well for the bulls in the coming week(s).
An additional factor worth noting is the behavior of the RSI. As you can see, the first of the indicators generated a sell signal. A similar performance in early October was preceded by a slightly larger correction, which pushed prices back to their peak formed on Sept. 6, 2022, raising the risk of history repeating itself.
Is that really the case? Let's take a look at the daily chart and see if there's any clues as to where we're headed.
First, let's look at the warning signals that were on the short-term chart at the time of the last OTA:
Last week's gains also broke the upper border of a quite short-term black growth channel.
the bulls have gone further north, creating another gap and a new November peak. These are undoubtedly positive developments, but one gap after another could signal that this is the last bull run, especially if we consider the volume seen in recent days.
As you can see from session to session, it's been dropping (which should not be the case if you're pushing significant resistance), suggesting that the movement may not be as healthy as it first appears.
In addition, yesterday's decline has increased the volume, which, combined with the shape of the candle, does not look pleasing. Why? Because there's been a bearish engulfing pattern that signals lower prices to come - especially if we add to that the negative divergences between the RSI and the CCI and the price of uranium. The CCI and Stochastic Oscillator levels are also not looking too good for the bulls, signaling that a market turnaround may be just around the corner.
Connecting the dots... there were quite a few.
Despite the success of the bulls and the new November peak formed on Nov. 24, the bulls were unable to close the day above the bearish engulfing pattern and negate the formation. This weakness, in correlation with all the more frequent warning signals, attracted sellers and resulted in (even on the same day!) the invalidation of the breakout above the previous peak.
The following days brought failed attempts to return to higher levels, resulting in a strong bear attack during yesterday's session. Their action led to a fall in price below the upper border of the short-term black rising trend channel (a very negative sign) and the formation of a large red candle, which closed two previously formed pro-growth gaps. In this way, the buyers lost two supports that could have helped them to stop the pressure of the sellers.
What does that mean for the price?
Unfortunately (for the bulls), the road to the south has been opened, and we could see a downward move even to the 38.2% Fibonacci retracement (27.54), which now serves as the nearest support.
Just below it, there are mid-Nov lows, which are the last support before an attack on the bottom line of the mentioned black rising trend channel and the bottom line of the green rising trend channel (marked with dashed lines and more clearly visible in the chart below).
Before the summary, it's also worth noting that the volume has increased significantly in recent sessions, underscoring the bears' commitment to the game on the trading floor.
Additionally, the CCI and the Stochastic Oscillator generated sell signals, increasing the probability of further attacks on lower levels in the coming day(s).
Summing up, all the warning signals sent out by the technical picture of uranium has resulted in a return of the bears to the market and a strong attack that has led to important changes that significantly increases the risk of further deterioration and fall in prices in the following days.
Finishing today’s Oil Trading Alert please keep in mind about your special code: OTAISBACK. By purchasing the premium version of Oil Trading Alerts until the end of November, you will get a 33% discount for a monthly subscription.
Have a great day and see you tomorrow.