Crude Oil is likely to trend lower

Crude Oil has broken its immediate uptrend line on September 25, but it staged a recovery to record a new high of USD83.70 on September 28. Thereafter, crude oil broke through the uptrend line again on October 1. Subsequent rebound did not bring the price above the uptrend line. In fact, the peak of this rebound was lower than the September 28 peak. Yesterday, crude oil recorded a lower 'low' than that chalked on October 2. The lower peak & the lower trough would satisfy the beginning of a short-term downtrend for crude oil (see Chart 1).


Chart 1: Crude Oil's October futures daily chart as at October 8 (courtesy of Barcharts.com)

The weekly chart (Chart 2) shows that crude oil should have good horizontal support at USD78, which is not very far off. A break of this level would likely follow by a test of the medium-term uptrend support at USD73.


Chart 2: Crude Oil's October futures weekly chart as at October 8 (courtesy of Barcharts.com)

The bearish outlook for crude oil may dampen the sentiment for Oil & Gas stocks, but I believe that the outlook would be generally positive for equity & bond if crude oil prices were to retreat further,thus lowering concern of inflation induced by high crude oil prices.