- The NYMEX oil chart appears to signal a continuation of the uptrend with a target near $87.
- However, movement toward this target is hindered by several resistance features which tend to slow the trend momentum.
The NYMEX oil chart has three technical features. They signal a continuation of the uptrend with a target near $87. However, movement toward this target is hindered by several resistance features which tend to slow the trend momentum.
The first technical observation is the behavior of the Guppy Multiple Moving Average indicator. The long-term group of averages is consistently well separated, indicating strong investor support for the uptrend. When price drops, investors come into the market as buyers, supporting the trend.
There is no current evidence of compression in the long-term GMMA. Compression shows that some investors are joining in the selling activity and signals the development of a bearish outlook. Price consistently rebounds from the upper edge of the long-term GMMA and this shows continued support for the uptrend.
The second technical observation is the role of the uptrend line. From June 2017 until August 2018, the uptrend line acted as a support level. This confirmed trend strength. But in August 2018, the price fell below the trend line and this is indicative of some trend weakness.
Now the uptrend line acts as a resistance feature. Price trends to move towards the value of the trend line and then retreat away from it. And this shows some trend weakness — but it is not, by itself, an indication of an end of the uptrend.
The third technical feature is the consistent behavior of oil price as it moves in trading bands. Oil has a well-established pattern of moving in trading bands around $11 wide.
Applying trade band projection methods gave a target near $76. This has been achieved and the pullback from that price level is an expected part of the trading band pattern. A breakout above the $76 level gives an upside target near $87.
A strong bullish trend continuation is shown when price is able to move above resistance near $76 and above the value of the trend line. This would signal that the trend line is again acting as a support feature.
All the support features and the trend strength continue to suggest that oil price is experiencing a temporary retreat. The longer term trading band target is near $87, so traders will buy in anticipation of trend continuation.
The ANTSYSS trade method is used to extract good returns from this trend behavior.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.
For more insight from CNBC contributors, follow @CNBCopinion on Twitter.