Crude oil: Let’s get to the bottom of where prices are going

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There is pressure on crude oil futures on Wednesday. The financial media is drawing a straight line from low Treasury yields and stock prices to a weak economy and low demand for crude oil. I won’t argue against that kind of thinking, but I do want to focus on where oil futures could be headed in the near term.

Let’s go to the chart.

In the weekly close-only line chart of the perpetual futures contract (a series of near futures contracts linked together to form a single long-term chart), I can see that price is breaking out of a three-month sideways consolidation pattern to the downside. Are. $80-$70 area. The price is being pushed down into an area of ​​potential support (former resistance) in the $70 to $60 area. Weakness below the midpoint of this area (below $65) would mean that the odds would increase that the support would be broken.

Trading volume is decreasing and the weekly OBV line has been weakening since mid-June. The Moving Average Convergence Divergence (MACD) oscillator is bearish.

In the daily point and figure chart of Light Crude Oil’s sustained contracts, below, we can see a recent decline and a potential downside price target in the $61 area – below the potential support area mentioned above.

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In this weekly point and figure chart of the continuation contract for light crude oil, I can see the same $61 price target as in the daily chart above.

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Bottom Line Strategy: Weak prices for crude will pull all energy plays down significantly – traders should reduce long positions or close sales accordingly.

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