Checking Back on Crude Oil

• Posted by Greg Harmon
• on December 18th, 2014

In mid November I noted 4 important price levels in Crude Oil in this space. 4 weeks later Crude Oil has hit 3 of them. That was fast. With only one price level left below it is time to revisit this chart and see what may be in store next.

The chart below has just 3 additional lines on it from the chart in November. Two of them form the symmetrical triangle around the price of Crude from 2011 to mid 2014. These have significance in the context of a possible reversal. From a technical perspective, the break out of the triangle lower would target a move equal to the width of the broad end of the triangle, or about $37. This would mean a move from the break point at 93 to about $56.

This is where the price of crude is currently holding. You can see that $56/barrel is also one of the important price levels. A reversal here at support would not be shocking. And a reversal is a possibility from the RSI as well. It is now showing oversold and is at a level not seen for at least 21 years.

Crude does not have to bounce, but if it does those same price levels that were important on the downside will now be important on a move higher. But should it continue lower it is not very far from the last level from the November write up, at $50. As I noted then, there is no battle that took place between buyers and sellers at $50 like at the other levels, but it is important because the trend line rising from 1999 says it has been important in the past. There is some kind of magic there.

Should that trend line fail to contain the Oil spill then the next important level to the downside is $40/barrel. This acted as resistance in the 2003 bounce and support in 2004 and the 2009 bottom. That should be enough levels for the next month or so.

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