[EN] Shoulder-Head-Shoulder in oil? // GaliortiTrading
In the more immediate term,
OILUSD
accumulates a large oversold position. In the August/October period of this year there was a clear bearish divergence between the RSI and prices, which together with the proximity of the top of the bearish channel presaged a price correction. This has been the case.
The proximity to the 200-session EMA makes us expect an immediate rebound as the most likely scenario. Likewise, the entry into a liquidity zone ($80-82) will facilitate this rebound.
However, we believe that the weakness of the rebound will lead to a second wave of declines based on:
- the breakout of the 200 EMA support in a second attack
- having previously swept the buy orders from the liquidity zone.
It seems to us that this fall will be fast and vertical until it reaches the bullish trendline of May this year.
Consequently,
OILUSD
could be developing a shoulder-head-shoulder chart pattern within its bearish channel that had been configured since the summer of last year. A return to the lower portion of the channel by the end of the first quarter of 2024 would not be out of the question.
This analysis, from a technical point of view, could be favored by the performance of the dollar index (depending on the Fed's rate decisions) and by the weakness of global demand if global GDP slows down as current data suggest, which will slow down industrial activity. Also, the development of the Ukrainian war could condition Russia to unilaterally increase its production in order to finance its spending.
We do not expect a supply/demand shock, but we do expect a downward restructuring of demand. The production restrictions of the other OPEC members to keep oil prices stable may be partially offset by China's objective to increase its production in order not to depend so heavily on the outside world.
Pablo G.
OILUSD
accumulates a large oversold position. In the August/October period of this year there was a clear bearish divergence between the RSI and prices, which together with the proximity of the top of the bearish channel presaged a price correction. This has been the case.
The proximity to the 200-session EMA makes us expect an immediate rebound as the most likely scenario. Likewise, the entry into a liquidity zone ($80-82) will facilitate this rebound.
However, we believe that the weakness of the rebound will lead to a second wave of declines based on:
- the breakout of the 200 EMA support in a second attack
- having previously swept the buy orders from the liquidity zone.
It seems to us that this fall will be fast and vertical until it reaches the bullish trendline of May this year.
Consequently,
OILUSD
could be developing a shoulder-head-shoulder chart pattern within its bearish channel that had been configured since the summer of last year. A return to the lower portion of the channel by the end of the first quarter of 2024 would not be out of the question. This analysis, from a technical point of view, could be favored by the performance of the dollar index (depending on the Fed's rate decisions) and by the weakness of global demand if global GDP slows down as current data suggest, which will slow down industrial activity. Also, the development of the Ukrainian war could condition Russia to unilaterally increase its production in order to finance its spending.
We do not expect a supply/demand shock, but we do expect a downward restructuring of demand. The production restrictions of the other OPEC members to keep oil prices stable may be partially offset by China's objective to increase its production in order not to depend so heavily on the outside world.
Pablo G.