Written by Rick Ackerman, Rick’s Picks
This Looks Like Just a Correction
Energy consumers shouldn’t get their hopes too high that the steep decline in crude oil prices over the last several days will continue.
Please share this article – Go to very top of page, right hand side, for social media buttons.
One reason I say this is that, after two sharp breaks in price during that time period, the selloff has exceeded only a single ‘external’ low on the intraday charts (see chart below). This suggests the move is still merely corrective relative to late June’s big run-up, which saw the August contract rally from $64 to $75 in less than three weeks.
A second reason I don’t put much store in the downtrend is this unpersuasive attempt by the Wall Street Journal to explain it:
‘Attacks on Libyan ports, U.S. sanctions against Iran and supply disruptions have underpinned the recent oil rally even as protectionist trade policies are raising fears of a global economic slowdown and lower consumption of materials. But analysts said higher output from Libya and the possibility that Russia could agree to further increase supply to fill possible production gaps were hurting prices Monday.’
Has anything really changed? It doesn’t sound like it. I will revisit my bullish logic if the weakness continues, exceeding mid-June 63.40 low. But until such time as that happens, my outlook still favors a move above $80/barrel.
This forecast is purely technical, by the way, and goes against my gut feeling that the global economy is not strong enough to push crude above $80, nor will it be any time soon.
Regardless, I’ll let my charts do the talking. Right now, they are saying quotes are bound for a high of at least 78.98 this summer.
If you don’t subscribe to Rick’s Picks, just click here for a free two-week trial. It will give you instant access not only to the chat room, but to actionable ‘touts’, intraday alerts, ‘jackpot’ bets using super-leveraged options and impromptu ‘requests’ sessions online.
