Wednesday, September 03, 2008

Crude Oil broke its 20-month uptrend line

Crude Oil broke the uptrend line that started in January 2007, yesterday. Unless a quick reversal were to happen-- with Crude Oil recovering above its uptrend line (say, at USD115-118 level)-- this breakdown could signal lower prices for the months ahead.

We can see the breakdown in Crude Oil prices in the upper chart (below), while the lower chart shows the index of US Airline sector ('XAL'). If XAL can break above its 20-month downtrend line (say, at the 32-33 level), then we can see further recovery in the share prices of US airlines (and, hopefully airline stocks on our local bourse). The bearish breakdown of the WTIC index does not necessarily lead to a bullish breakout for the XAL index, because many airlines are struggling with lower load factor (due to a drop in consumer demand) as well as high level of debts (due to aggressive expansion undertaken in recent years).

Chart 1: WTIC & XAL's weekly chart as at September 2nd, 2008 (source:

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