On April 29th, 2019, I wrote :“Despite the fierce drop in oil last Friday, I am still of the opinion that the trend remains up and prices are going higher. As long as the oil price remains above $59, I would argue that bulls are in charge. My swing target is $70 where I will look to reevaluate. The chart above depicts the trend channel that oil has been trading in since breaking out from the lows . . . I still remain bullish oil unless we see a break of the channel in oil futures.”
I have updated the trend channel (green) from the original post with a new channel (blue) that has formed as a result of last week’s break. I closed my long positions on the break of the channel. The move also violated the 200-day moving average and the 50-day moving average in overnight trading.
While the action recently has been weak, on the demand side buyers aggressively bought the $60 level, and the RSI still has not hit oversold conditions.
The horizontal support line around the $58.20-$58.40 zone is oil’s key level, in my opinion. I still hold the view that over the longer term, as long as oil remains above that level (I use $59 to be conservative), and particularly if equities continue their grind higher, the bullish picture in oil remains intact.
If oil definitively breaks $58, I would turn bearish and expect a relatively swift move to $54, and likely the $50 range.
Much depends on equities, as oil remains tightly correlated to stock prices. As one goes, likely so goes the other.
Charts made with Optuma Software