Monday night on CNBC’s Fast Money, the Chartmaster Carter Worth outlined his technical analysis of the crude oil market. In the video below he says that he expects crude oil to bounce off its current test of support on the chart, and move higher.
On Mad Money, which follows “Fast” on CNBC, Jim Cramer presented his thesis on the energy space. Jim said “I think demand for oil is slowing, perhaps slowing enough to cause a major breakdown in price.” He thinks that the strong quarters oil companies have recently reported does not reflect economic reality. You can read his complete analysis here.
My view, while based on the technicals like Carter’s, is more aligned with Jim’s outlook.
Support on the WTIC Light Crude Oil Continuous Contract chart has already been breached. The uptrend line drawn off the lows of the last six months was taken out decisively last week. Moving average convergence/divergence is tracking lower and Chaikin money flow is in negative territory. The RSI reflects a loss in upside price momentum and the money flow level indicates distribution.
The relative strength index is in an overbought condition and the reading suggests there could be a brief bounce in price. But that previously solid six month support level is now formidable resistance, and a quick move back up to $66 is likely to fail.
The path of least resistance for oil is lower.