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In this week’s dissector, we take a close look at the US light crude oil that ended lower this week by declining 2.3 per cent and closed at $91.97/barrel on the New York Mercantile Exchange. The light crude oil was choppy during the week. After making an intra-week high of $95.9 on May 28, it reversed downwards breaching its 50-day moving average.
Since late January, this commodity has constantly encountered key resistance in the band between $97 and $98 and reversed downwards. It is currently testing key support and 200-day moving average at around $92.
It has been on a sideways consolidation phase in the intermediate-term, trading between $85 and $100 since July 2012.
MEDIUM-TERM VIEW
Following an uptrend from the lower boundary of the sideways consolidation range of $85, the light crude oil encountered resistance in the zone between $97 and $98 in early and late May.
Subsequently, it changed direction triggered by negative divergence in daily price rate of change indicator. It is in a short-term downtrend.
The daily moving average convergence divergence indicator has signalled a sell and is on the brink of entering the negative territory from the positive territory. The daily relative strength index is charting lower and is likely to enter the bearish zone from the neutral region. Both daily and weekly price rate of change indicators are featuring in the negative area implying selling interest.
An emphatic fall below the current support level of $92 will pave way for a decline to $89 initially and then to $ 85 in the medium-term.
Conversely, an upward reversal from current support can encounter resistance at $95 and then at $97- and $98-band in the medium-term. Further, a strong up move beyond $98 can take the commodity higher to the psychological resistance level of $100. Subsequent important resistance is positioned at $105.
INTERMEDIATE-TERM VIEW
Since July 2012, the light crude oil has been on a broad sideways consolidation phase hovering between $85 and $100. A decisive rally above the upper boundary will strengthen the bullish momentum and take the crude oil price northwards to $105 and to its subsequent resistance at $110 level in the intermediate-term.
Nevertheless, a strong decline below the lower boundary or the significant long-term support level at $85 can pull the commodity down to $80 or to $75.
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