•  We remain tactically neutral on Brent
  •  The technical picture has not changed

The price of Brent continued its consolidation for the third consecutive week on October 18 with the Brent closing above 200MA (Weekly), whereas capped by 14MA (Weekly).

The technical sentiment is not in favor of bulls; we may see some more consolidation after a big swing between Aug-Sep. Oil traders are waiting for fresh clues as global growth in stake.

“Global risk sentiments were dented by China’s disappointing Q3 GDP growth print of 6% year on year and warnings of a weak global growth prognosis at the IMF-World Bank annual meetings on Friday,” OCBC Bank analysts said in a note Monday, reported by S&P global.

Even with the mixed daily indicators, the price is still holding the double top pattern formation. We expect dips to the 200MA (Weekly) level and parallel support located at $57.15 to continue to draw bargain hunting, as we have seen the case for the past two weeks and mid-August as well. Whereas, upside should be capped at $60.50 its 14MA (Weekly).

For three weeks, the technical picture has not changed. It’s possible to make the case that Brent oil has now entered a consolidation phase. If that’s the correct interpretation, everything since early October should be considered within the context of a technical bounce. The bottom of the range is located at $57.15 and $555.75. Breaking lower than $55.70 would further confirm the broader downside bias and open up the possibility of $50.75 and $50.00 levels.

The relative strength index (RSI) indicator is not showing any strength, strongly suggests a consolidation phase, whereas the oscillator has been bullish. If it starts moving higher, watch out for $61.80 and $63.00 levels.

View: As long as $55.70 is supported, watch out a decent bounce towards $60.00 and $60.50. A decisive breakout above $60.50 could allow the price to outperform in the near-term. 

 

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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