US Oil Suffering Longest Losing Streak in Years on its Way to 6 Year Low

Talking Points:

• Crude Oil drops below $45 approaches a six year low
• This is streak of weekly losses for the commodity since November 2008
• To use the consecutive bars indicator in your strategy, click here

Crude Oil fell 58% from June of 2014 to January of 2015. Following a brief reprieve where the commodity rose 32% through May we once again find crude on the lam. Another 26% drop over the past two months, sees the market approaching a low last explored in 2009 below $32 a barrel. With this tumble Crude CFDs have matched the longest losing streak in consecutive weekly declines – 8 straight bearish candles – since November 2008.

Explanations for the decline range from a supply glut that has ballooned between US shale production and OPEC maintaining high output targets to valuation factors arising from the higher US currency – the primary pricing instrument for the commodity. Regardless of which factor has contributed the greatest influence, the impact of lower energy prices is being felt around the world in both lower headline inflation figures and reduced export revenues for countries that ship the natural resource.

The Consecutive Bars Indicator creates a histogram by tallying the number of consecutive up and down candle closes. The size of the histogram bars increases in proportion to the count of consecutive up or down candles. According to the Indicator, US crude oil CFDs (ticker = USOil) have fallen for 8 consecutive weeks beginning May 15th.

This remarkable decline can be an indication of both momentum and perhaps even used as a ‘contrarian’ measure of extreme condition. While the consistency certainly does show a strong bearish trend, the longer the consecutive declines extend, the more likely a bullish bar brings the run to a close. That does not however imply a reversal of the same magnitude. A representation of the Consecutive Bars indicator used to analyze USOil can be seen in the chart below.