Brent Crude Oil Showing Strong Bearish Signals as it Approaches the 2014-Low

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Brent Crude Oil Showing Strong Bearish Signals as it Approaches the 2014-Low

Oil Price Falling Despite Geopolitical Risk

Despite seeing the most violent fighting in the Israel-Gaza conflict in years and Russia shelling Ukraine, oil prices have fallen this week. The daily chart shows the market falling from a couple weeks of consolidation. The dip shows respect to the cluster of 200-, 100-, and 50-day simple moving averages as resistance. It is an early sign of a downtrend commencing.

Also note that as price dips below 105, it is approaching the 2014-lows at 103.95-104. Looking at price action since late June through July, it looks like traders are poised to test this low and break it in August.

Brent Crude Oil Daily Chart (8/1)
brent crude oil 8/1

(click to enlarge)

The Weekly Chart tell a bearish story as well. You can see that price has really been consolidating since the 2012 high at 128.40. After retreating to 88.50, price has been congesting, and we can see the triangle pattern that has formed since.

Brent Crude Oil Weekly Chart 8/1
Brent Crude Oil Weekly Chart 8/1

(click to enlarge)

This week’s bearish action broke below the triangle support and is falling from the 200-, 100-, 50-day SMAs. These two occurrences signal a bearish outlook. The 100-handle which has offered support, could be next. The weekly chart shows the support in 99-100 area since 2011.

Notice that the RSI has never really cleared 60 after falling below 30 in 2012. This suggests that in the weekly chart, Brent Crude Oil price has maintained a bearish bias, one that could materialize in August.

If we get a pullback, the market should see sellers around 107. If oil price does respect last couple of week’s consolidation range and hold below 107, the bearish outlook is still valid, with downside risk toward 100.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.