Crude Oil Analysis: Bull Market Loses Momentum as Middle East Pressures Fade
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Crude Oil Analysis: Fundamental Issues
The initial reaction of the financial spread betting markets to the unrest in some oil-producing countries of North Africa and the Middle East seems to have faded a bit now.
The crude oil market itself hit a high of $126.88 on the 8th of April and since then it first dropped significantly and then started to move sideways.
Summer has also arrived in the Northern Hemisphere, easing demand for oil and further alleviating pressure on the price.
Having said that, things are still volatile and any threat to supply will no doubt result in further upward pressure on the price.
The rebuilding process in Japan following the recent disaster, along with continued strong growth in China and other countries in the Far East, will keep demand strong for the foreseeable future.
Crude Oil Analysis: The Technical Picture
If we consider the technical analysis of the chart below, we can see clearly that the strong bull market that reigned since the last quarter of 2010 has apparently lost momentum.
The price is currently trading within the Ichimoku cloud, which is an area of uncertainty where traders are advised to stay out of the market until clear signals emerge.
The green Chinkou Span line is below the price of 26 periods ago, further strengthening our view that the bull market has come to an end, at least for now.
The red Tenkan Sen line is also below the blue Kijun Sen, showing that at least in the short term the bears are reigning.
Going long on oil for a medium-term trade can only be recommended once the price breaks upwards out of the Ichimoku cloud again.
If the price breaks out of the cloud in a downward direction and drops below the recent brief low of $105.15, we could actually see the start of a medium-term bear market, in which case going short will be a reasonable option.
Good luck and happy trading
Shai Heffetz, InterTrader
(Original article written 1 June 2011).
Spread betting carries a high level of risk and you can lose more than your initial deposit, so you should ensure spread betting meets your investment objectives.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade. Neither InterTrader nor CleanFinancial.com accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.
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'Crude Oil Analysis: Bull Market Loses Momentum as Middle East Pressures Fade' edited by DB, updated 02-Jun-11
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