Crude Oil looking to a fourth week of trading flat!

Crude Oil futures lost about -4.6% yesterday despite the weekly inventories report showing a dip in the commercial stockpiles of Crude Oil. For the week ending September 18th, the US stock piles fell by 1.9 million barrels, compared to the median estimates calling for a decrease of 533k barrels. The US Oil rigs count also continued to show sharp declines but the data did not help support prices. For the fourth week in a row, Crude oil futures remain range bound trading within the highs of $49.3 and lows of $43.47. The near 4-week sideways price action comes after the bullish engulfing candlestick pattern on the weekly chart formed on 23rd August, which saw prices dip to new multi year lows of $37.76. For the week, at the time of writing, Crude oil is down -0.31%.

Crude Oil Technical Analysis

On the weekly charts, after the bullish divergence was formed off the higher low at 44.75, prices rallied to correct the divergence which saw Crude oil futures run up to the $60 mark and started to trade sideways before declining back to post a new low at $39.86. Prices attempted to test the short term resistance at $49.15 which saw a sharp rejection pushing prices lower. Currently, we notice a bearish hidden divergence on the weekly charts, comparing the highs of 21st June at 61.56 and the current lower high formed around 13th September at 47.70. This short term hidden bearish divergence validates the overall downtrend in Crude Oil, but $44.83 remains a level to watch for.  If support holds the declines at this level, Crude oil could remain range bound until either we see a rally above $49.15 resistance or a break below $44.83 for the next leg of the bias to set in. With prices trading well below the falling trend line, we remain biased to the downside.

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Crude Oil Weekly Chart, 24/09

On the daily chart, the bull flag pattern noted for the past few weeks has shown that the resistance zone between $47.28 – $48 has been strong enough to contain the rally. Prices are now trading near the support at 44.76 which could keep the sideways price action on for a few more sessions. The main support at 44.24 however remains critical as a break below this support (and a potential test of resistance) could see Crude oil prices decline lower with the next main support at $41.89 – $42.39 coming into play. On the daily charts, the price action has also turned bearish with Tuesday’s session closing with a hammer pattern followed by the bearish close yesterday. Combining the candlestick pattern with the overall trend, we can expect the support at $44.24 – $44.76 give way for a dip to $42.39 at the minimum.

Comparing to the Stochastics oscillator, we notice a bullish divergence still in play with the lows at $37.76 failing to confirm with the higher lows in the Stochastics oscillator. This yet again brings to mind the support level at $41.89 – $42.39 level of support. In the event that prices are contained near this support level, a new bullish leg could evolve which will eventually see prices targeting the resistance levels noted, all the way through to $50.75.

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Crude Oil – Daily Chart, 24/09

Looking forward, the US economic data will see the final revision to the second quarter GDP as well as a speech by Janet Yellen. While China has continued to signal a slowdown in the markets, thus reducing its appetite for Crude Oil, traders need to watch the price levels of $41.89 – $42.39.