Oil falls more than 3% on softening demand: Is that an opportunity or not?
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Crude's Charts are Still Looking Bearish
Multiple Bearish Timeframes
On just about every timeframe or any chart you look at, the picture for oil just looks bearish. Crude's price action has continued to fall below major support zones despite an ongoing Middle Eastern conflict.
Missed Short Opportunity
My previous comments mentioned price support near the 200 moving average. Once the price dipped below this major moving average, some major selling followed. It was a great short opportunity. The recent selling strongly confirms the bearish head and shoulders pattern from my recent posts.
A major factor contributing to the downfall of oil prices over the past couple of years is the fact that economies worldwide have been contracting due to the Feds interest rate hiking regime. This contraction is expected to continue.This will put a major dent in oil demand.
Without any further supply cuts by OPEC, I don't see any reason for oil to climb back above 100. Unless, if the Middle Eastern conflict intensifies and expands to more oil producing countries.
I think it is safe to say that the recent rally spurred by OPEC is over, or at least taking an extended break. Check out my previous oil comments in the link below.
The very long-term trend is downward, and it appears that the price action has rejected the bear market resistance of this long-term term trend.
The supply cuts by OPEC are what caused the rally throughout this year.
It appears that the rally caused by OPEC is over as oil prices have fallen since the beginning of October and throughout the Middle Eastern conflict.
Notice the reversal doji followed by a bullish engulfing candle. This a candlestick pattern you will see often when the price is possibly about to rebound.
What is Next for Crude?
I believe there is more downside for crude in the future. Speaking to all of you die hard oil bulls, I think it is safe to be a bit more bearish. At least in the near term, right? Even the charts of $Energy Select Sector SPDR Fund(XLE.US)$ and $SPDR S&P Oil & Gas Exploration & Production ETF(XOP.US)$ have turned bearish.
But in the very near term, the price action is very oversold. One might expect a short-term rebound before more downside ensues. XLE's charts are calling for a small rebound based on the technicals.
As for crude, if and when the rebound happens, then I will be watching the resistance levels in the chart below for a reversal back to the downside.
This is just a quick reminder for all of you swing traders. Since I called out oil's bearishness in my previous post, Crude's price has fallen as much as 13% at one point. This would have been a very profitable swing trade opportunity. Check the link below and stay tuned for many more.
As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you vant afford to lose. Give some of your investments time and know when to cut your losses.
Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.
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