Oil: Daily Continuation or 4 Hour Exhaustion?
My opinion on Oil has stayed the same: I am bearish because there is a supply glut and also the world is slowing down.
However, there are many reasons for oil to be propped up, due to the fact that US banks were forced to lend to oil/shale companies when oil dropped last time in order to prevent lay offs. Oil being propped for not just oil companies but also for banks who now have a large exposure to energy.
Ironically, the oil markets seem to be the only markets currently that are adhering to fundamental analysis and have true price discovery. Of course calculations of future Chinese oil demand is being factored in the price as the CCP have shut down cities and also highways which of course impacts oil demand.
The daily charts shows the break and close below he 52 zone and now we have had the retest. Once again, yes you can enter now with a better risk vs reward to the downside BUT the probability will not favour you as much. The real retest signal is when we form a lower low which CONFIRMS the lower high which would mean a break below 49.40. We could very well go to 45.00.
On the bullish case, oil downtrend has been extended and it seems we may be making a pattern perhaps a double bottom. What it is telling us is that it may be difficult to make another lower high (with a lower low). A break above 52 would be the key trigger.
On the fundamental side, we must factor in yield. Funds are in a position where they need to make yield and both stocks and bonds are at or near all time highs. This is when looking for "value" comes in. Funds may think this energy sell off is over extended, and just to make yield, oil and energy look attractive at these levels compared to everything else in the market. This is the type of crazy macro environment we are in, and can boost energy.
However, there are many reasons for oil to be propped up, due to the fact that US banks were forced to lend to oil/shale companies when oil dropped last time in order to prevent lay offs. Oil being propped for not just oil companies but also for banks who now have a large exposure to energy.
Ironically, the oil markets seem to be the only markets currently that are adhering to fundamental analysis and have true price discovery. Of course calculations of future Chinese oil demand is being factored in the price as the CCP have shut down cities and also highways which of course impacts oil demand.
The daily charts shows the break and close below he 52 zone and now we have had the retest. Once again, yes you can enter now with a better risk vs reward to the downside BUT the probability will not favour you as much. The real retest signal is when we form a lower low which CONFIRMS the lower high which would mean a break below 49.40. We could very well go to 45.00.
On the bullish case, oil downtrend has been extended and it seems we may be making a pattern perhaps a double bottom. What it is telling us is that it may be difficult to make another lower high (with a lower low). A break above 52 would be the key trigger.
On the fundamental side, we must factor in yield. Funds are in a position where they need to make yield and both stocks and bonds are at or near all time highs. This is when looking for "value" comes in. Funds may think this energy sell off is over extended, and just to make yield, oil and energy look attractive at these levels compared to everything else in the market. This is the type of crazy macro environment we are in, and can boost energy.
