Oil

It wont come as any surprise that Oil has been on the slippery slope to lower prices and it may be beneficial now to take a look at where this began and where it could go.

My chart history wont go back far enough to show you the big picture, so I have borrowed a chart from the Nasdaq website to aid this post. If anyone from the Nasdaq are unhappy over the use of your public chart and request I remove it, I shall do so.

Here is the Nasdaq 10 year chart on Crude Oil.

The media has been full of experts saying they will see 40 dollar prices. It does not take an expert to pull that figure out of the air when you look at historic prices.The business TV news and various financial web sites who pimp this news provide me with hours of entertainment, the best comedy shows I have ever seen.

Clearly there was a 2009 major buying in Oil at the 40 dollar price area. It is inevitable we see some reaction there again. Low Oil prices have two wanted effects, one is from Opec and the other is from Governments who wish to punish a large energy exporting country.

Here is the weekly chart, all you see is Oil falling of a cliff and one tiny blue candle formed in the perfect place to test the resolve of buyers. Clearly other plans were afoot and down it goes.

The tiny candle is now a support and resistance area and is likely to be a strong one too when price eventually comes back to it.

Daily chart. The newly formed support and resistance area is now marked with a line to help guide your eye. Note the strong break of this and the very painful retest which look like buyers. Indeed there were buyers and I will let you think who was behind that. A hint could be a non english speaking nation.

Clearly damage limitation was in full swing, but when the worlds finance houses are against, nothing will save your behind. On the futures charts I saw a huge volume spike on that candle, and was sustained for the day. Thats not the typical pull back I would expect to see.

On the bottom right of the chart there is new price action showing a slow down. A battle took place between the bulls and the bears and is not yet resolved. We will delve in deeper in the next time frame lower.

4hr chart.

The support and resistance area is now more clearly defined and once broken, price did not look back until a long fall in price took place. What looked like buying in the above chart is also more clearly defined in this time frame. What we see is buying over 3 x 4hr periods and into near term supply, which clearly held. None of this comes as a surprise given the news driven frenzy at this point.

At the origin of this supply test I have a white line showing the next area price has to test for remaining buyers. Price pushed through the line hard on the way down and when it retracted we see a number of candles with wicks on top. This shows us sellers came back in and around those higher prices where the near term selling originated.

The initial fall from the S/R line was too fast to keep going and some slow down and pull back for a good percentage of the move was inevitable. On the right of the chart we see the start of this happening. There is no major floor for buying with a view to turning the market bullish again. Above price there are a few places where the continuation could happen. Of course you also have to keep in mind the tricks of pro money. If everyone is expecting 40 dollars a barrel for Oil, if the price keeps retracting some will think the buyers have come in early. This can happen for weeks, or a wide range setup. Looking at price action at each of the potential continuation areas above is key to you getting a feel for how pro money are positioning.

1hr chart.

I mentioned a price range in the above text and now I will show you one potential range. This 1hr time frame has set into a range already and look at the reaction of price at the top of the range vs the bottom of the range.

It is obvious there are still more interested sellers than there are buyers. In the past I have said that when price forms a range, it only makes sense to sell of the top of the range and buy off the bottom. But keeping in mind of the overall trend you are in and ideally, buy or sell in line with the overall trend to help reduce risk.