Oil Price May Have Peaked: Technical Analysis
WTI crude prices may have made or be close to making their highs, a technical report by PVM oil associates said Wednesday.
The top international oil broker said it sees huge resistance at the $146.45 level for WTI, and $147.73 level for Brent. "Recent flirtations with [these levels] have created a large area of range resistance, resulting in failures," the report said.
The outlook follows the second largest decline in dollar terms in the history of the Nymex WTI contract on Tuesday.
The broker said stochastic indicators – comparing the closing level with the recent price range – over the past days had proved valuable technical tools and there were no new targets higher until current levels were closed over.
"I believe the market has now topped," author Robin Bieber wrote. "The market is very vulnerable to serious break down and lower numbers." According to PVM, any rallies to resistance are now clear selling opportunities.
Tuesday’s downside move surprised many in the market. Rob Laughlin, a senior broker at MF global said he had not seen prices move so aggressively in such a short space of time outside war conditions.
"I think we saw banks, funds and trade selling-all enter the market, which should be confirmed by a reduction in open interest," he said.
Zug-based analyst Olivier Jakob at Petromatrix has meanwhile cautioned over current trading volatility.
Intraday volatility on crude oil is starting to get out of control, he wrote Wednesday, adding "we do not think that the higher normality is something that oil trading companies or professional speculators can handle on a longstanding basis."
Jakob expects volatility to rise further still ahead of WTI option expiry this Thursday, adding that $130 a barrel is the key number to fear for August options due to the number of puts on the strike price.
"Any close below $135/bbl will create an additional correction risk on Thursday into the option expiry." Support levels though remain firmly in focus.
Stephen Schork of the Schork Report believes that unless a key level below a 38-50% retracement is broken, it could pose a problem for the bears. "If they cannot break the box, then the bulls will be in a great position to run this market right back up in the bear’s face…like they have been doing, consistently since last September."