On Tuesday, crude oil hit a fresh 2018 high of $64.89, but then reversed and declined very quickly, erasing most of Friday increase. What encouraged oil bears to act and how did this decline affect the short-term picture?
Yesterday, the Energy Information Administration said that U.S. oil output is expected to continue its rise to 6.55 million barrels per day (with production from shale rising by 111,000 bpd) in the coming month, which encouraged oil bears to push the price of black gold lower. As a reminder, before the Friday market closure, they received one more reason to act – the Baker Hughes report, which showed that the oil rig count jumped by 10 to 752 (to the highest level since the beginning of September 2017). What impact did the above-mentioned circumstances have on the daily chart of crude oil?
Technical Picture of Crude Oil
Let’s start today’s alert with the long-term chart of black gold (charts courtesy of http://stockcharts.com).
From the long-term perspective, we clearly see that the situation didn’t change much. Why? Because black gold is still trading under the 200-month moving average, which successfully continues to block the way to higher prices.
Did Tuesday fresh high change anything in the shorter perspective?
Before we answer this question, let’s recall the quote from yesterday’s alert:
(…) although oil bulls did their best, the pro bearish candlestick formation remains in the cards (more about its parameters and its overtones we wrote in our last Oil Trading Alert).
Additionally, volume, which accompanied Friday’s upswing was visibly lower than day earlier, which raises some doubts about the continuation of the rally (especially when we factor in the current position of the indicators). Nevertheless, we should keep in mind that crude oil futures hit a fresh 2018 high of $64.89 yesterday.
