The Crush in Crude
- Posted by Greg Harmon
- on March 9th, 2017
Yesterday I wrote about the relationship between the Energy ETF and Crude Oil prices here. The ratio had been in a rut but showing signs of movement. It ended with two possible resolutions: Oil breaking higher out of consolidation quickly for the ratio to break the range, or a bounce in the ratio at support led by either Oil falling or broad energy stocks rising. We did not need to wait long for an answer.
Less than 3 hours later Crude oil started moving lower, eventually breaking a 3 month consolidation to the downside. The chart below shows the strong move lower. Technically so strong as to look for continuation. But also so strong that it moved out of its Bollinger Bands® and may need a short term pause to reset that gauge. Momentum as measured by the RSI is firmly in the bearish zone and near the edge of being oversold. The MACD has crossed down and turned negative. All this point lower.
So how low can Crude oil go? Recent activity shows that the 200 day SMA has been an area of support. That sits at just under $49, a spot that Crude is reaching in the pre-market hours. A stall here could reset the price within the Bollinger Bands and prepare it for another leg lower. Below that the next support level does not appear until about $45.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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