Oil Falls off Record Prices… but for How Long?

Jan 11, 2008: 12:18 PM CST

Crude Oil prices slipped off the recent $100 per barrel record, and are now completing a sell swing lower. But how long will the recent sell swing last?

  • New price highs NOT confirmed by new momentum highs
  • Resistance is clearly at $100 per barrel
  • Rising trendline has been broken (beneath $96)
  • Rising 20 period moving average has been breached (at $95)
  • Price may find potential support at $92 with the 50 period moving average
  • Price is in a confirmed uptrend – odds favor higher prices

For educational purposes, I have also highlighted a “Bollinger Band Squeeze Play” in early October.

Due to the Range Expansion/Contraction principle, prices often eject out of consolidation zones (highlighted by narrowing of Bollinger Bands) and trend in a sustained ‘breakout momentum’ mode. New momentum highs confirmed this break.

It would appear that prices should support in the $90 to $92 range before making an attempt to retest or exceed new price highs at $100.

Due to the potentially weakening economic conditions in the United States, oil may fall on expectations of reduced demand… but we make money off price movements, not expectations.

Nevertheless, higher oil prices are a further drag on the economy. I’m sure a lot of investors (not in crude oil) would love to see a break of the $90 zone. For technical traders, that would signal a potential price move lower.

Until it happens, price is still in a confirmed uptrend and as such, odds seem tipped in favor of higher oil prices in the short term.

1 Comment

One Response to “Oil Falls off Record Prices… but for How Long?”

  1. Mike Lee Says:

    And looks likes an inverse SHS on the oil !

    sincerly yours Mike Lee Denmark