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WTI Crude: Bulls Resilient Despite Bearish Momentum, Fundamentals

Published 03/11/2014, 01:19 AM
Updated 03/05/2019, 07:15 AM
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US benchmark crude fell to a 3-week low on global economic growth concerns following the fall in Chinese exports and Japan's GDP miss. Comparing the price action of WTI and the S&P 500, it is clear that WTI traders are not as bullish as stock traders. By comparison, this does make Oil traders a tad more bearish, but that may be unfair as stock traders may be unreasonably bullish.

Hourly Chart

WTI Crude Hourly

Indeed, seeing that prices have stabilized above 101.0 and failed to even test Friday's swing low (Thursday US session) suggests that WTI Crude bears aren't really that strong. That's not to say that downside risks are over as bearish momentum from last week's decline remains in play - led by a surprise increase in Crude inventory stockpiles last week. Nonetheless, it is unlikely that sharp declines in WTI will be seen in the near future, and any sell-off should be met with significant support fighting against it.

There are good fundamental reasons for this support as well, as the energy market continues to hold its breath as the Ukrainian crisis heats up further with the Crimean referendum coming up in a few days time. As such, it is understandable that there will be speculators looking for bargain buys in case of war breaking out, which should keep prices afloat in the interim.

Daily Chart

WTI Crude Daily

Support also can be seen from the price action on the daily chart. As long as prices stay above 101.0, the rally that started in mid January will remain in play, opening up a move back towards 105.0. Should bulls even manage to climb back above 105.0 within this week, stronger bullish acceleration and new 2014 highs would be very probable. Stochastic indicators agree as the Stoch curve has reversed and is threatening to cross the Signal line. Even though this reversal did not happen within the Oversold region, it is possible for the Stoch curve to find "support" between 25.0 - 40.0, and as such we should not dismiss a bullish cycle signal if it does materialize.

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