Levels to watch: gold, silver and crude

Could US light crude’s break higher point to a bullish phase for oil?

Oil steam injection
Source: Bloomberg

Gold fails to break higher
Yesterday’s initial strength in gold turned and faded back towards the recent norm, with the vast majority of price action taking place within $1186 and $1192 over the past five trading days. Currently at $1189, we are equidistant between those levels. The fact is that this is consolidation within a range of consolidation ($1178-1224) and as such, I do expect a breakout in the near future.

My preference is for a break higher and I therefore see any movements back towards the lower-end of this current consolidation as a good buying opportunity. With the daily chart showing an oversold stochastic and a MACD histogram beginning to turn higher, it seems only a matter of time until we push back towards the $1200 mark and higher.

Silver’s attempt to break higher a hint of things to come?
Yesterday, silver saw a great example of a long-legged doji, bringing with it a big question mark for many in the markets. Does this mean we are at a bottom? I believe so, with price having come back to retest the top-end of the triangle in play throughout 2015, we are now seeing the 50-day simple moving average providing support to limit any movement towards the downside.

As such, I see any movement back to the 50-day SMA as a great buying opportunity and do not expect to see price return back into the triangle. Following yesterday’s spike higher, it is clear that we could see some serious upside once this gets going and I would be surprised if we didn’t see a move back towards $17.34 this week.

Brent comes back to retest descending trendline
The outlook for Brent crude is looking a little bit less bearish recently, since hitting the 50% retracement last week. Today has seen a third retest in as many days of the descending trendline dating back to 6 May. This repeated testing of resistance is a little worrying as I would like to see a strong sell off from such a key trendline (currently $65.66). However, we continue to create lower highs and as such, until we move above the $66 mark, I am obliged to expect a move lower.

The trendline is also joined by the 20-day SMA (currently $65.51), which is also providing strong resistance. Thus, these levels will be key to watch out for in any potential breakout. Whilst we are seeing new lower highs being created, there is also a bullish divergence on the daily chart and when taking into account the moves in US light crude, I am waiting on the sidelines until we see a strong resolution one way or another.

WTI break could point to a more bullish period for oil
US light crude has done what Brent has failed to, breaking higher from the recent descending channel that has been in place. We have still yet to move higher than the recent swing high of $60.93, which would be crucial to the realization of a new bullish phase in US light prices. However, with the move seen today, I believe it does look likely that we will begin moving higher.

I await a break and close above $60.93 for a bullish outlook and thus for the time being we are in a little bit of a wait and see mode, where we haven’t created a new high, but have broken out of a crucial formation.

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