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Don’t trust rallies. Range bound. Use the s/t MAs as pivots. Watch RBOB.

Published Friday, June 3rd, 2016

Introduction.  The contracts once again scythed below their short term (s/t) MAs. They then, as result,  plunged down to the next level of (range) supports and held, before rallying  strongly to close either at, or just above, all the s/t MAs again. This is not the first time that this has occurred, and the contracts are now behaving in classic “range” mode. The hallmark for this form of market behaviour is the s/t MAs cluster together – mathematically entirely logical – and they then act as either trapdoors to support (the last two days are a perfect example of this) or springboards to resistance. This is exactly the action we are witnessing at the moment, and moves confirmed by closes (m/c) over the s/t MAs will give us tests of resistance, and that’s probably the limit of the upside, much like the limit to the downside yesterday was the bottom end of the range support, as exemplified by WTI around 48.35 and Brent around 48.59 (low yesterday of 47.97 and 48.84 respectively). Heat and Gasoil are slight exceptions to this as they are holding their 13 day MAs on the dips. The daily stochastics meanwhile are negative which makes any follow through higher on rallies to resistance unlikely. Continue to observe RBOB carefully at its key pivots at 162.31/15 support (bull/bear pivot and range) and 163.72 resistance (13 day MA) – moves beyond these extremities will give the next signal.

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Posted by Robin Bieber