Brent crude has continued to move up so far this week as hopes of the imminent arrival of a vaccine for covid-19 remain high and manufacturing in China continues to rebound well. On the other hand, fresh cuts to flights announced since yesterday mean that the outlook for demand from aviation remains very weak. This technical analysis of UKOIL looks at the four-hour chart of Brent plus futures.
The main resistance on this chart is last week’s high just below $45.30. Low support is the latest swing low around $37.90, but areas from moving averages and Fibonacci are likely to be more important in the immediate future than this fairly distant zone.
Moving averages give a buy signal, with all three of the 50, 100 and 200 SMAs below the price. However, the 100 SMA remains below the 200. The double golden cross of these lines by the 50 SMA last week came after very strong gains, so we might expect that the main focus among MAs is the 50 from Bands. A bounce from here seems to be possible if the area is tested in the near future.
There is currently no sign of saturation from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter at around 67 is about halfway between neutral and the overbought zone. Volume has been slightly lower so far this week but still with more buying than selling.
Both of the last two Mondays (2 November and 11 November) saw strong liquidity-driven upward movements. Each was followed by what appear to be fundamental movements as positions continue to be built as recovery progresses. However, yesterday’s lower high followed by a downward engulfing candlestick should probably not be ignored. Depending on fundamentals and sentiment over the next few days, a retracement downward and consolidation might be in view.
The confluence of the 61.8% daily Fibonacci retracement area with the 50 SMA strengthens this zone around $42.60 significantly. It adumbrates that this is a key support which would challenge another attempt to push lower. Below this, the 50% area in the value area between the 100 and 200 SMAs is another crucial zone of support.
This chart of futures on Brent (MOEX, continuous with current contract at front) reflects basically the same situation as the spot CFD. However, we can observe very high buying volume in the first half of the month plus another uptick in buying yesterday. This would suggest ongoing gains for UKOIL as well although consolidation still seems likely over the next few days.
The technical picture for Brent is overall quite positive and more gains seem favourable over the next few weeks. This week’s regular data from the USA, namely the EIA and API’s stocks and Baker Hughes’ rig count, will probably drive short-term volatility but not affect the price in a sustained manner unless there are significant surprises.
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