United States Oil (USO) spiked 40% since Christmas Eve thanks to OPEC’s aggressive production cuts
US oil prices have spiked 40% since Christmas Eve thanks to OPEC’s aggressive production cuts.
Crude’s recovery from last year’s bear market hit another milestone on Wednesday. Oil topped $60 a barrel for the first time since November 9.
The dramatic rebound mostly reflects the effectiveness of the strategy implemented by Saudi Arabia-led OPEC. The oil cartel and its allies, including Russia, agreed last year to sharp production cuts in response to a supply glut formed in part by surging US output.
“The positive sentiment from OPEC’s cuts is outweighing the bearish impact of the US shale boom,” said Matt Smith, director of commodity research at ClipperData. “They are working.”
Crude plummeted as low as $42.53 a barrel on Christmas Eve. Other risky assets, most notably US stocks, have rebounded since then, though not nearly to the same degree as oil.
Fresh evidence of the impact of OPEC’s strategy arrived on Wednesday. US commercial crude oil inventories plummeted by 9.6 million barrels last week, according to a new report from the Energy Information Administration.
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 11.74.
The projected upper bound is: 13.09.
The projected lower bound is: 12.00.
The projected closing price is: 12.54.
A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 4 black candles for a net of 1 white candles. During the past 50 bars, there have been 32 white candles and 17 black candles for a net of 15 white candles.
An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend. It then signifies that the momentum may be shifting from the bears to the bulls.
If the engulfing bullish pattern occurs during an uptrend (which appears to be the case with UNTD ST OIL FUND), it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.
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 84.5588. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 17 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 69.82. 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 buy 57 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 126.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 7 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 4 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 0.220 at 12.500. Volume was 36% below average (neutral) and Bollinger Bands were 51% narrower than normal.
Open High Low Close Volume___
12.270 12.520 12.250 12.500 19,568,760
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 12.10 11.51 12.95
Volatility: 18 31 39
Volume: 20,628,386 23,546,624 25,188,844
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 3.5% below 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 9 periods.