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Crude Oil - Medium-term Forces vs. Long-term Forces

Crude Oil - Medium-term Forces vs. Long-term Forces

2016-04-08 13:50:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • Crude holds key support symmetry
  • Timing relationship next week should prove critical

Crude Oil - Medium-term Forces vs. Long-term Forces

Crude Oil - Medium-term Forces vs. Long-term Forces

I have been touching upon a similar theme in most of my writings over the past couple of weeks. We are at a point in the markets where some pretty strong medium-term term trends have developed against opposing longer-term trends (copper, USD, stocks to name a few). Are we going to see the longer-term trends reassert themselves or are these medium-term counter-term trends going to continue further to test some much deeper retracement levels in 2Q16?

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As markets often do, they are making figuring this out as complicated as possible. Crude is an instrument that clearly fits this bill as the commodity advanced more than 60% off the early February low before stalling out about 20 cents shy of the 200-day moving average late last month. The 200-day moving average has been a remarkable level of resistance over the past year or so as every counter-trend recovery attempt has failed right around that widely followed resistance. Was the failure last month the long-term downtrend reasserting itself or was the recent turndown from there just a minor pause before another squeeze higher? I can’t say. The fact is that crude found support exactly where it needed to earlier this week as it tested the lower parallel a pitchfork structure drawn from the late January low and has headed directly higher since. As such, this medium-term uptrend needs to be watched very closely next week. There is a pretty clear timing relationship towards the latter part of the week. A secondary low (against this week’s low) into this timeframe above the pitchfork parallel (currently around 36.50) would be pretty positive and open the door to another important push higher. A close over the 200-day moving average over the next few days would also be a pretty clear positive technical development and signal an important change in behavior. A failure on the other hand to hold above the support next week would argue that we have witnessed a secondary high against the 200-day moving average similar to how things played out in November. In this case look out below.

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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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