Will the oil price bounce significantly at this price?
26th November 2018 08:56
by Alistair Strang from Trends and Targets
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Trump's intervention has undone much of oil's rally, and the big oil producers have suffered a similar fate, so chartist Alistair Strang drills deep and reveals where the oil price must bounce.
Oil and the Oil Sector (FTSE:NMX0530)
Some of the major producers share prices have tended to behave silly recently, presumably mimicking price reductions in crude. We thought it was time to revisit the master sector index in the hope of drilling deeper...
Firstly though, US Crude is causing a problem. The current cycle, presently around $50 a barrel, should find a bounce point by $48.
There are some quite grotty implications, should the $48 line break as it could easily find a bottom around $36 eventually. If our suspicion for a bounce anytime now is justified, this ties in with blue on the Oil Sector big picture chart.
At present, we are supposed to believe the Producers Index intends further reversals to 8,200, perhaps even 7,820 if broken. Balancing this argument is once of these weird "price movement things", where a trend movement will sometimes back-test a historical trend.
In the case of the NMX0530, this tends align with blue at 8,490 presently.
Only with closure below 'blue' will we tend to fear the worst for the sector, along with some dire future potential Crude oil price drops.
Brent Crude is in a similar pickle to US Crude, presently trading around the $59 mark. It has its own trendline capable of producing a bounce, ideally just before the 56 dollar level. The implications of closure below the $56 level are strangely similar to US Crude with a bottom around the $35 mark!
For the sake of oil shares, hopefully our expectation of a bounce very soon comes true.
Source: Trends and Targets Past performance is not a guide to future performance
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
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