Oil Prices Fall to Fib Support
Not more than a month ago, we discussed the OPEC deal that saw an extension of production cuts for another nine months. Normally, a deal that constrains supply should help bring prices higher, but that simply hasn’t happened. As that deal was announced, Oil prices fell; and this led to the ‘Buy the Rumor, Sell the News’ takeaway as investors had bid prices higher leading into the announcement, only to abandon the trade after the news came out.
Since that deal was announced, bids have been fleeting as sellers have remained in control. On the chart below, we look at the rather brisk down-trend that’s developed over the past month in WTI Oil prices.
Chart prepared by James Stanley
The past month of falling prices has brought WTI down to an interesting area of support around 42.89; as this is the 76.4% Fibonacci retracement of the 19-year move, taking the low in December of 1998 up to the high of July, 2008. On the chart below, we’re also applying a trend-line that was established from 1998-2001 that still appears to hold relevance today, as this had helped to catch resistance in May before the selling took-over while also capturing the lows of the Financial Collapse in 2009.
Chart prepared by James Stanley
On the hourly chart below, we’re zeroing-in on potential areas of resistance to look at down-side continuation. While an example of support such as we have now can often be used for a bullish reversal thesis, the veracity with which Oil prices have been dropping should, at the very least, bring caution to the bullish stance. Instead of using this support area to buy, traders can use this to stem the lows, near-term, in order to find an area of resistance with which stops can be placed on the other side.
Chart prepared by James Stanley
Haldane Appears to Contradict Carney: Are We Seeing Dissension at the Bank of England?
Yesterday saw BoE Governor Mark Carney essentially rule out the prospect of near-term rate hikes. And this was like a dousing of cold water on the hopes triggered from last week’s BoE rate decision, when the bank voted 5-3 to hold rates flat with three voters dissenting in favor of rate hikes. In this morning’s speech, Mr. Haldane indicated that he may be ready to vote for a rate hike in the second half of the year, and in response the British Pound is running-higher, giving credence to the idea that what we’re seeing is a short-squeeze.
