ChartTalk: Crude Oil at Critical Support Levels: Future Trend Hinges on These Levels

ChartTalk: Crude Oil at Critical Support Levels: Future Trend Hinges on These Levels

by | Jun 30, 2023 | ChartTalk

WTI US Oil has entered a period of consolidation, influenced by various factors including supply-demand dynamics, and market sentiments among others. This technical note aims to examine the current price movements of Crude Oil and analyze the crucial support and resistance levels that will determine its future trend. By combining technical analysis with fundamental factors, we provide valuable insights for traders and investors.

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Relative Performance Compared to Gold

When comparing the performance of Crude Oil with Gold (XAUUSD), it is evident that Crude Oil has remained relatively flat, experiencing a modest weekly gain of 1.32%. On the other hand, Gold has seen a marginal decline of approximately 0.05% on a weekly basis. The Relative Strength line (RS Line) suggests that Crude Oil is underperforming Gold, indicating that investors are favoring the precious metal over Crude Oil in the current market conditions.

Technical Analysis: Key Support and Resistance Levels

A critical observation in the chart of WTI US Oil is the consistent support near the 66-67 price levels. This range has proven to be a crucial support area, with the price finding significant buying interest and rebounding multiple times. Furthermore, this support level aligns with the 200-week moving average (MA), further reinforcing its importance. The current value of the 200-Week MA stands at 67.48.

On the upside, strong resistance is encountered near the 74-75 levels. This range has acted as a formidable barrier, limiting upward movements and causing price retracements. Traders and investors closely monitor this level as a breach or breakout has the potential to determine the further direction of WTI US Oil.

Daily Chart Analysis: Bearish Trend Prevails

Examining the daily chart, it becomes evident that WTI US Oil is currently experiencing a downward trend. The price remains below multiple moving averages, including the 10-day, 40-day and 200-day moving average. This configuration indicates that selling pressure outweighs buying pressure, contributing to the prevailing bearish sentiment in the market.

Traders should closely monitor any breakouts or breaches of the support and resistance levels. A breach below the support may indicate further downside potential, while a breakout above the resistance could signal a bullish reversal. Until these events occur, the price is likely to continue consolidating within the established range.

Long-Term Trend Analysis

Since reaching a high at 126.48 in March 2022, Crude Oil has been on a declining trajectory. The subsequent lower top at 121.36 in June 2022 further confirms the bearish trend. In August 2022, the 10-Week MA crossed below the 40-Week MA, signaling a shift in momentum. Currently, the 10-Week MA and 40-Week MA are at 71.01 and 77.52 respectively.

Technical rebounds are expected to be limited by the 40-Week MA, which currently stands at 77.52. A bearish trend would reverse only if Crude Oil is able to cross and move above this price level. On the downside, strong support exists in the form of the 200-Week MA, currently placed at 67.48. As long as the price remains below the 10-Week and the 40-Week MA, upside potential will be limited. However, breaching the 200-Week MA could lead to further weakness for Crude Oil. Traders should closely monitor the price behavior against the 67 support level.

Consideration of Fundamental Factors

While technical analysis provides valuable insights, it is crucial to consider fundamental factors that can influence the price of WTI US Oil. Global demand, geopolitical events, and supply dynamics play significant roles in determining the future trajectory of Crude Oil. Traders and investors should closely monitor these factors alongside technical indicators to analyze the further movement in US Oil.

Conclusion

In conclusion, the current price movements of WTI US Oil indicate a bearish trend, with strong support near the 66-67 price levels and resistance near the 75-77 levels. Technical analysis suggests that the price is likely to continue consolidating within the established range until a breakout or breach occurs. Long-term trend analysis confirms the bearish sentiment, with the 10-Week MA below the 40-Week MA. Fundamental factors such as global demand and supply dynamics should also be considered when analyzing the future trend of WTI US Oil. Traders and investors can use this information to make informed decisions and navigate the market effectively.

Foram Chheda, CMT

ChartTalk: Is Gold Ready to Break Out? This Level Holds the Key!

ChartTalk: Is Gold Ready to Break Out? This Level Holds the Key!

by | Mar 30, 2023 | ChartTalk

Investment demand for gold surged in 2020 due to the COVID-19 pandemic, which triggered a global recession, unprecedented monetary and fiscal stimulus measures, and heightened market volatility. According to the World Gold Council (WGC), global gold-backed exchange-traded funds (ETFs) saw record inflows of 877 tonnes in 2020, surpassing the previous record of 646 tonnes in 2009.

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Gold is one of the most sought-after commodities in the world. It has been used as a store of value, a hedge against inflation, and a safe haven asset for centuries. But can gold continue to shine in the current market scenario?

Gold has been in a strong uptrend since 2019 when it broke out of a multi-year consolidation pattern. It reached an all-time high of 2075 in August 2020, before correcting to 1765 in November. Since then, it has bounced back to test the previous high twice, forming a double-top pattern.

A double top consists of two peaks that are roughly equal in height, separated by a trough. Although a double top is considered resistance from a technical perspective; however, any consolidation near the high point indicates strength.

Gold has strong support that exist around 1900. It is currently trading between 1950-2000, which is a critical resistance zone. If gold can break above 2000 and sustain above it, it will stage a breakout and invalidate the double-top pattern and resume its uptrend. However, if gold fails to break above 2000 and falls below 1900, it will confirm the double top pattern and can stay under broad consolidation for some more time.

The monthly chart shows some positive signs for gold. The moving average convergence divergence (MACD) indicator, which measures the momentum and trend direction of an asset, has crossed above its signal line and turned bullish. This indicates that the buyers are gaining strength and could push the price higher.

From the Indian context, Gold has been trading in a narrow range for the past few weeks, as it faces strong resistance at 60000 levels. This level has been tested several times but failed to break above it convincingly. A sustained move above 60000 would signal a bullish breakout for the precious metal, opening the door for further gains towards 65000 rupees and beyond. However, if gold fails to overcome this hurdle, it may consolidate with the support that exists in the 55000-56000 zone.

Another factor to consider is the relative performance of gold against silver. Gold and silver are often correlated, as they are both precious metals that respond to similar market forces. However, sometimes they diverge, as they have different industrial and monetary uses.

The relative strength (RS) line of gold against silver shows how gold is performing relative to silver. A rising RS line means that gold outperforms silver, while a falling RS line means silver outperforms gold.

The RS line of gold against silver has been broadly rising since 2011, indicating that gold has been more favored than silver over the long term. However, in the past year, the RS line has been mostly flat, indicating that both metals have been performing similarly. This suggests that there is no clear advantage for either metal at the moment.

As of now, the price behavior of Gold in the 1950-2000 range needs to be closely watched. Any meaningful move above 2000 is likely to take the precious metal higher toward 2070-2075 levels. However, until that happens, we might well see Gold consolidating in a 1900-2000 zone.

Foram Chheda, CMT