Oil Technical Update

Previous: Oil Crude Oil Maintains Strength; At Consolidation Resistance (9/3)

Brent Crude 9/10/2012 4H Chart 4:40PM EDT


Brent Crude oil prices have been ranging since mid August after trading above the 111.00 handle. It has recently established a range roughly between the 111.00-111.50 support area, and the 116.35-116.60 resistance area as shown in the 4H chart. This consolidation can be said to be keeping a bullish stance in this time-frame because:

1) The RSI has been kept above 40 after tagging 70.
2) The price is sitll above the 200-4H SMA.

Counter-trend scenario: If the 4H RSI dips below 40, and price falls below 111.00, which would clear below the 200-4H-SMA, the bullish stance would be gone introducing the bearish outlook in the short-term.

Trending in a sideways market: The daily chart shows less of a bullish stance, though still a slight one. Price is above the 200-SMA, but barely. Also the 200-day SMA is flat, a sign of overall sideways market. The RSI shows been swinging from 70 to 30 and back above 70, and reflects a directionless market since 2011.

Continuation: If the rally since June continues, price needs to break above 116.60. A clear break opens up a range-breakout target near 121.11, which is coincident with a previous support pivot seen at the left side of the daily chart. Above that we look at the 2012 highs near 128.13.

Double top: A break to the downside has a range-breakout projection to the 106.45-50 area. This would also create a double top. The bearish outlook becomes even stronger if a subsequent pullback fails to break into the double top, or stops at the lower half of it and falls back. A key pivot will be around the 102 handle if the bearish action extends further into the medium term.

Looking to FOMC: Whether there will be QE3 is a key factor to price of brent. Priced in USD, oil will rise in price if more stimulus is on its way, which pushes down the greenback and firms commodities. This should also give strength to the CAD, which is correlated to oil prices. Therefore make sure to monitor this Thursday's (9/13) Fed policy meeting.

Brent Crude Daily Chart 4:50 PM EDT


Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.