Charting Crude Oil into Daily Resistance Oct 13

Oct 13, 2011: 9:01 AM CST

What’s going on with Crude Oil at the moment?

Let’s take a look at the Daily Resistance Level along with a “step-inside” perspective from the intraday chart.

Let’s start with the prevailing Daily Chart trend – it’s a downtrend as evidenced by the progressive series of lower price lows and lower price highs, which is confirmed by the EMA Orientation (the 20 EMA consistently resides under the 50 EMA).

A down-trend is in force until clear signals prove a reversals – none of those exist at the moment.

That takes us to our present price swing into the falling 50 day EMA, which has turned back price three prior times since price reversed lower in May 2011.  Logic would suggest that the 50 EMA would again turn-back price a fourth time.

Also, I drew in little “bear flag” patterns which also have repeated three times in the past… although the current rally does NOT take the form of a bear flag – it’s still a move into the EMA resistance near $86.

It’s also worth noting that a Positive Momentum Divergence has formed into the late September low under $77.50… but you can also see how a similar positive divergence formed at the end of June, and the outcome through July.

So, the main idea is that the $86 level is a key resistance area that is a “Make or Break” between buyers and sellers.

Let’s now step inside the 15-min intraday chart to see if we can get a clearer picture:

Looking at the @CL Futures, we see the ‘inner-workings’ of the recent rally into the $86 daily chart target level.

As price entered (tested) the $86 price target, a clear Negative Momentum Divergence undercut the rally into $86 – that’s not something you want to see if you expect price to continue its rally.

In addition, this morning’s breakdown of the 15-min EMA and trendline structure – roughly at $85 – is a sell signal, and as of this writing, price appears to be confirming this sell/hedge/protect signal.

For an educational reference, you can see what happened in early October with regard to the $77 Daily Chart support level that was met with an intraday Positive Momentum Divergence as labeled.

The recent up-swing also began with an opening impulse gap.

Anyway, this is a good example of how it is beneficial to combine two timeframes to get a better picture of the likely/probable – though never guaranteed – next immediate swing in price.

Corey Rosenbloom, CMT
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6 Responses to “Charting Crude Oil into Daily Resistance Oct 13”

  1. tomterrific Says:

    I know this is off subject but you have addressed this indicator before and I would like you to address again the $NYHL indicator (NYSE New Highs – New Lows) and its recent action indicating a bottomin the October 3rd and 4th and subsequent action time frame.   Thanks.


  2. Theyenguy Says:

    Bearishness is seen in the stock market as the currency yield curve, RZV:RZG, is manifesting bearish. and the Optimized Carry ETN, ICI, is showing a hammer at 200 day average suggesting that the current risk trade and carry trade rally is over. This is confirmed as the Yen, FXY, is rising, and the yen carry trades, DBV:FXY, and CEW:FXY, are performing bearishly. The US Dollar 200% EFT, UUP, has fallen to support at 200 day moving average, which suggests that the recent rally in world currencies, DBV, and emerging market currencies, CEW, is over. The Too Big To Fail Banks, RWW, Financials, XLF, European Financials, EUFN, Banks, KRE, KBE, and IAT, Investment Bankers, KCE, are performing bearishly. The leading carry trade banks BSBR, ITUB, BBD, BMA, BBVA, BFR, FBP, IBN, HDB ,WF, UBS, NBG, as a group are performing bearishly. Gold mining stocks, GDX, are performing bearish as well. I point out that at market turns, the HUI Precious Metals, GDX, and the 30 Year US Government Bond, GDX, always make market turns lower together; and today the ratio of GDX:EDV, is turning lower, suggesting that both stocks and bonds are going lower. The ratio of basic materials, IYM, to US commodities, USCI, IYM:USCI, has hit resistance and is turning lower. Likewise the ratio of materials, XLB, to commodities, DBC, XLB:DBC, has hit resistance and is turning lower, suggesting that the materials rally is over.

    I warn that a run on money market funds, MMFs, can easily happen from any number of causes, one of which is liquidity evaporation, and concern over collateral, as well as rising interest rates. The money market funds can easily break the buck, that is their steady one dollar value, at any time. Shaun Richard of Mindful Money writes on the timely issue of Central Bank Foreign Exchange Liquidity Swaps. A major theme of this week, and something rarely discussed in the main stream media over the weekend is that the first tender for the US dollar swaps is only on Wednesday. I expect for some banks at this time these will be the equivalent of finding an oasis in a desert! Such are the stresses at this time that one of those most in need Dexia has collapsed before it even got there. And Shaun Richard writes the helpful article A Guide To Central Bank Foreign Exchange Liquidity Swaps where he writes on US Dollar FX Liquidity Swaps.

  3. T.Kamada Says:

    I'm just curious. Why did you use this combination of the daily and 15-min? Why not the daily and 30-min? Thank you.

  4. Corey Rosenbloom, CMT Says:

    Good question!

    We could have used any intraday chart but I felt like the 15-min chart showed the negative divergences a little clearer given the screen-space I had available in the blog picture.  The 30-min would have worked just as well though.

  5. T.Kamada Says:

    Thank you, Corey!

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