Oil Trend Remains Strong
Daryl Guppy | Jun 05, 2018 14:18
Originally published by Guppytraders.com
The NYMEX oil price has pulled back sharply from $72 to around $66. This pullback takes place within the environment of a well established uptrend. The chart suggests that the pullback is not a change of trend, but its instead a temporary retreat.
There are three features which support this conclusion. The first feature is the long term support level near $65. This level acted as a resistance level in 2018 January and again in April. Oil has a well established pattern of moving in trading bands.
The standout feature on the chart is the strong support level near $43 and resistance near $54. This makes the trading band around $11 wide and gives an upside projection target for the trading band near $65 which has been achieved and exceeded. Applying the same trade band projection methods gives a long term target near $76.
The second feature is the location of the uptrend line. The uptrend line starts from the anchor point near $43 on 2017, June. This trend line has successfully acted as a support level and provides a good definition of the rising trend. It has been tested several times so it acts as a second support feature with a current value near to the value of the support level around $65.
The third, and perhaps most important feature is shown with the Guppy Multiple Moving Average (GMMA) indicator.
The long term group of averages is well separated and this shows strong and consistent investor support for a rising trend. When price retreats, investors come into the market as buyers. This is the most consistent trend support behaviour shown in the GMMA indicator on the oil chart in nearly a decade.
The degree of separation between the long term and short term GMMA is also steady. This consistent degree of separation is a characteristic seen with stable trends. This again confirms trend strength and stability and suggests that the current retreat is temporary rather than the beginning of a trend change..
The short term group of averages which reflects the way traders are thinking shows a low level of volatility. This group is not characterised by rapid compression and expansion. This shows that traders are buyers whenever the price falls. This tells us that traders are also confident that the up trend will continue.
These support features and the trend strength features all suggest that the oil price is experiencing a temporary retreat. The longer term trading band target is near $76 and potentially higher. It is higher because the $76 level has no history of providing strong support or resistance.
These are all characteristics of temporary retreat in a strong trend.
We use the ANTSYSS trade method to extract good returns from this trend behavior.
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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