Crude Oil may have turned bearish

Crude Oil may have turned bearish. If you plot a Trend Fan (or, 3-fan line) onto WTIC daily chart (see below), you will see that WTIC has broken the third fan line. This means that the market for Crude Oil has turned bearish. An brief explanation on the usage of Trend Fan as given by Gecko Software is given below:

As a trend moves up in scale, a chartist will draw a line across price bar lows or, when a market is moving down, across the price bar highs.

As the market continues to make its retracement, we can draw another trend line across the next level of support or resistance. The line is support if the market is moving up and resistance if it is moving down.

The last move of the trend was resistance for the first trend line, and is now support for the second trend line. The third trend line shows that the market has made a solid retracement down past this third fan line.

When the market crosses the third fan line, it is considered to be confirmation of market retracement. A market that was once considered bullish is now bearish, or if bearish, would now be considered bullish. When the markets price bars cross above or below the third trend fan line, this is your signal and confirmation that the market has shifted from bullish to bearish, or bearish to bullish.

For more on Trend Fan, go here.


Chart: WTIC's daily chart as at Dec 7, 2009 (Source: Stockcharts.com)

WTIC will try to hold onto the USD70 horizontal support. The USD65-75 area is heavily congested area & could provide good support for WTIC in the near-term. However, the inability of WTIC to make any significant gain on the back of the rout in USD, is a clear sign that the demand for crude oil is fairly weak. A sharp correction in WTIC could well trigger a correction for Oil & Gas stocks.