• Bearish-Neutral
  • Rallies have been sold

Brent crude oil failed to close below the 200MA (Weekly) and 50MA (monthly) last week triggering a corrective rally to the critical resistance level which was previous support. The daily indicators give a mixed outlook as the RSI is recovering but lacks conviction. However, the oscillator is not improving.

Interestingly the RSI has been making a higher low pattern since June low, technically speaking positive RSI divergence. However, the fundamental picture is not supporting the RSI divergence.

Trade tensions between the US and China and the increasing likelihood of a no-deal Brexit could have a direct impact on oil demand. Last week IEA said, “oil demand growth at lowest since 2008”.

In August Oil marker report IEA said: “ Growth estimates for 2019 and 2020 have been revised down by 0.1 mb/d to 1.1 mb/d and 1.3 mb/d, respectively.”.

Justin Smirk at Westpac said,” Crude oil (Brent) is down 12% to US$58bbl as fears about a conflict in the Gulf region were more than offset by global growth concerns and increasing US supply.”

Coming back to our technical picture, support at the 78.6 fibs held firm last week keeping the momentum in favor of consolidation or a corrective rally before retracing back to $52.00 and $50.00 levels.

On the higher side, a decisive breakout above 59.20$ its earlier swing low could open the headroom towards $60.00$, and $61.00 levels its 20MA.

View: We advise traders should stay flexible and maintain liquidity to capitalize on opportunities when they arise.

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

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