United States Oil (USO) could see a short-term correction
U.S West Texas Intermediate and international-benchmark Brent crude oil futures settled higher last week, but the limited trading range suggests the buying may be slowing. Early in the week, prices rose to their highest levels since November, driven by turmoil in Libya along with ongoing production cuts pledged by OPEC and its allies, and U.S. sanctions against Iran and Venezuela. However, renewed concerns over rising U.S. inventory and production as well as concerns over a global economic slowdown helped put a lid on prices.
For the week, June WTI crude oil settled at $64.02, up $0.87 or +1.38% and June Brent crude oil closed at $71.55, up $1.21 or +1.69%.
Support has been strong because supply is tightening. This is being supported by real supply data. Concerns over demand are just speculation. Earlier in the week, Bernstein Energy said in a note, “We believe global demand has another 10 million bpd of growth, with over half from China.”
Additionally, “While macro fears of an economic hard landing may be overblown, the concentration risk of global oil demand (in Asia) remains under appreciated,” Shayne Heffernan said.
The Chinese economy is likely the key to future demand. Traders aren’t as bearish on China’s economy as they were near the start of the year. This is because a deal to end the trade dispute between the United States and China seems imminent, and China’s government made available massive amounts of stimulus to keep the economy afloat.
The markets may appear to be top heavy, but the selling pressure is not coming from the supply side although rising U.S. production remains a concern. The problem may actually lie within the price action. With the nearly four month rally at or near key technical resistance areas on the major charts, speculative buying seems a little scarce as investors are being forced to decide whether to continue to buy new strength or buy a pullback into a support or value zone.
Essentially, buyers may be seeing risk in buying strength or “chasing the market” higher nearly 120 days from a bottom and at current price levels. We could see a short-term correction because of this, but I don’t think we’re going to see a change in the longer-term trend.
Holding above $63.48 for indicate strong buying in the June WTI futures market. Falling below it will likely create a rangebound trade. June Brent will strengthen on a move through $71.77.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 12.34.
The projected upper bound is: 13.81.
The projected lower bound is: 12.87.
The projected closing price is: 13.34.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 23 black candles for a net of 3 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 70.8029. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.69. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 1 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 81. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 9 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 0.030 at 13.300. Volume was 29% below average (neutral) and Bollinger Bands were 5% wider than normal.
Open High Low Close Volume___
13.360 13.395 13.280 13.300 18,541,304
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 13.16 12.11 12.90
Volatility: 22 25 38
Volume: 21,204,376 20,450,410 25,179,316
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND is currently 3.1% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into USO (mildly bullish). Our trend forecasting oscillators are currently bullish on USO and have had this outlook for the last 26 periods.