Crude Oilfrom ChartWorks:: published by Institutional Advisors
The inability of the crude oil rally to carry through on the upside by mid August and breakout through the July resistance suggested that a downside correction was very likely in the coming weeks. Prices are now $9 below the August high and approaching the 50-week moving average ($66.90) where it usually finds support. The weekly RSI(14) is currently at 46. Anything in the mid to low 40’s is generally enough to create a bounce off the moving average. However, it is way too early to be looking for a seasonal low. This is more likely to occur in October or later (see table on following below).
If prices decline through $67 then we must be aware of the implications.
Independent of the seasonal influences, each instance in the past two decades that the oil market has closed below its 50-week moving average and then followed through with a lower low (1985, 87, 90, 91, 92, 95, 97, 01 and 03) it has declined to the lower Keltner Band (currently $59). Weekly RSI(14) readings have been in the range of 33 to 39 at the bottom.
Seasonality as it relates to the mid summer rally
September 10th, 2006
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