Crude Oil Prices at the Mercy of Risk Trends
Crude Oil Highlights:
- WTI oil cratered through 2016 trend-line, near December 2018 low
- Brent oil trading around that 2018 low, a break to spell more trouble
WTI oil cratered through 2016 trend-line, near December 2018 low
The price of oil has been swinging around hard the past few sessions with nearly unprecedented volatility inflicting pain on the risk-trade, with stocks at the center of that. There are rate cuts for stocks and production cuts (potentially) for oil, but neither are likely to stem the tides of high volatility for the foreseeable future.
The 2016 trend-line that was recently broken is considered a significant form of resistance. There is a very steep trend-line running down off the January high that also runs in the vicinity of the 2016 iteration as well.
On a further weakness the December 2018 low will be targeted as support, when the risk-trade last came apart at the seams. It currently resides at 42.20. This may help put a floor in, but if it doesn’t then selling could become more aggressive.
Watch stocks closely. The low from Friday may have been the crescendo in fear for now, and further volatility and probing from here may be only a retest before the risk trade firms up. If this is the case, then oil may not come back strong, but will likely put in a respectable recovery. If the bounce in equities turns out to be only that, then look for the 42 level to get taken out. For now, with volatility so high the environment favors nimble short-term traders playing the back-and-forth swings.
WTI Crude Oil Daily Chart (2016 t-line above, Dec ’18 low below)
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Brent oil trading around that 2018 low, a break to spell more trouble
Brent crude has been trading weaker than its US counterpart, WTI, and on that it could continue to be the leader on the downside should another major wave of selling hit stocks, rates, and economically sensitive commodities. There is resistance around the trend-line off the January high and a slope from 2016 in the vicinity of 55. On the downside, 51.54 is the low from the other day to watch.
Brent Crude Oil Daily Chart (trading around Dec ’18 low)
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.