Oil Trend Change
Daryl Guppy | Nov 14, 2018 12:24
Originally published by guppytraders.com
The NYMEX oil price has developed a critical trend change. It’s a relatively rapid move that was been confirmed in the last week with the move below the lower edge of the long term Guppy Multiple Moving Averages (GMMA). The immediate downside target is near $54.
There are three features of the trend changes. They are important because these features will also provide barriers to any new uptrend. The first feature is the failure to breakout above resistance near $76 was the leading indication of uptrend weakness. However the pullback from this area could have been consistent with the usual rally and retreat behaviour between the levels in the trading band. The move below $65 support showed this was not the usual rally and retreat behaviour.
The second feature is the support level near $65. Oil tends to move in trading bands around $11 wide. This is why the next support target is near $54. Any rebound from $54 will meet resistance near $65.
The third feature is the way the long term GMMA has turned down. It has not yet begun to compress, but the downturn is the first confirming evidence of a trend change. This is the first time this has happened since September 2017.
The third feature is the way the lower edge of the short term GMMA has moved below the lower edge of the long term GMMA. This relationship is usually associated with a sustained change in the trend.
These features confirm a sustained change in the trend rather than a temporary retreat followed quickly by a rebound. Traders take short positions and tighten stop as the price nears $54. Traders watch for consolidation near $54 because this has the potential to develop a base for a rally back towards $65. However any rebound rally will also be limited by the position of the long term GMMA. This feature will also act as a resistance point. Rapid compression, crossover and expansion of the long term GMMA will further confirm downtrend strength.
Axicorp . Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.
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