Crude’s secret stabilization

January 14, 2015 09:48 AM

While it might not feel like it and the abounding warning about $20 crude oil counsel against, there is a bullish candlestick technical pattern that could be developing.

A higher closing level would be required to finish the pattern and even with this, a confirmation with still higher prices would be required to satisfy a conservative position taker. Still, it is hard to argue oversold conditions.

RSI (14 day) is below 21, indicating strong oversold conditions. There have been 11 new lows since Dec. 22 without a three session pause. Finally, the commodity has fallen by 58% since the Jun 20th $107.73 high to yesterday’s CLH5 of $44.20 low.

The developing pattern includes a long dark body day with a ‘bozo’ open on Monday followed by a lower open and doji like or ‘bullish hammer’ performance on Tuesday. Today’s higher open could leave Tuesday’s candle alone to mark a bottom should prices finish higher still. Any strong performance, say a $2 bullish advance to $48 or so would further mark the formation as impressive.

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About the Author

Martin McGuire, managing director at TJM Institutional Services