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Crude prices have seen an interesting fortnight, finally breaking out of a three-month range, with US inventories first rising then falling, while the OPEC report showed a surprise rise in Saudi production. The picture is muddied by this mixed bag of factors, providing traders with a very fluid and unpredictable environment. However, charts help us look past this jumble of conflicting announcements and so this article will focus on what the charts tell us about the coming days, weeks and months for crude prices.
Looking at the weekly chart, we are clearly in an uptrend considering the creation of higher highs and higher lows since the January 2016 low. That being said, there are signs of weakness in this picture. Firstly, we have seen the price trading within a rising wedge pattern, which is bearish by nature. The price has subsequently dropped through trendline support, with this week’s upside largely coming back into that trendline as potential resistance.
Interestingly, we have utilised the 50-week simple moving average (SMA) as support this week, which actually provided absolute low point for the past swing low, back in mid-November. Given that we have broken lower from what was already a bearish formation, this chart looks as though we could see the undoing of crude prices, with a break back below $44.00 the key to signaling the end of this year-long uptrend.