Both of the main benchmarks for crude oil have moved up so far today in the aftermath of a surprising decrease of about 10 million barrels from American stocks as reported by the API last night. Meanwhile around 25% of American offshore production has now shut down as Hurricane Sally, a category 2 storm, approaches the Gulf Coast of the USA. Today’s technical analysis of UKOIL looks at the four-hour chart (H4).
High resistance here is the latest high around $45.55, but areas from moving averages are likely to be more important in the near future. The clearest support is the latest low around $39.85.
Moving averages continue to give a sell signal, with each of the 50, 100 and 200 SMAs successively below slower lines. However, price has now moved above the 50 SMA from Bands. The main resistance in the short term from moving averages is the 100 SMA, currently at around $43.40 and intersecting with the upper deviation of Bands.
Bollinger Bands (50, 0, 2) currently do not give an overbought signal, but the slow stochastic (15, 5, 5) at 94 is close to the maximum reading. We can also observe that buying volume remains fairly low so far this week.
The recent double bottom seems to confirm the importance of the psychological area around $40 as a support. Meanwhile the interrupted three soldiers from 8.00 GMT yesterday would usually be considered as indicating a reversal of the latest losses.
The main barrier to more gains now is the 61.8% area of the daily Fibonacci fan. How price behaves around this area if reached over the next few days could be crucial for determining the likelihood of continuing strength or losses in the medium term. To the downside, though, losses seem to be unfavourable much beyond the 23.6% daily Fibonacci retracement area, especially considering the confluence of this with support around $40.
Brent has definitely looked stronger since yesterday morning but it’s too early to call a resumption of the uptrend. For most traders, focus on the short term seems to be sensible in these conditions. While the meeting of the FOMC this evening GMT is a crucial event for markets generally, crude oil in particular is likely to move on the EIA’s regular data on American stocks. This would be especially true if there was a significant deviation from the API’s release yesterday.
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