This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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.