Crude Oil Price Update – Strong Uptrend Overriding Weak ‘Overbought’ Oscillator Signals

U.S. West Texas Intermediate crude oil futures closed higher on Thursday in a lackluster, but two-sided trade. The market traded mostly lower early in the day on concerns about a new variant of COVID-19, but rebounded at the mid-session after a trade deal was reached between Britain and the European Union, bolstering the global economic outlook.

On Thursday, February WTI crude oil settled at $48.30, up $0.18 or +0.37%.

Britain clinched a narrow Brexit trade deal with the European Union just seven days before it exits one of the world’s biggest trading blocs in its most significant global shift since the loss of empire. Crude oil traders are hoping the new agreement helps boost demand once the pandemic has ended and conditions return to normal.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $49.43 will signal a resumption of the uptrend. The main trend will change to down on a trade through $46.16.

The minor range is $49.43 to $46.16. Its 50% level at $47.80 was support on Thursday. This helped generate the intraday upside bias.

The major support is the long-term Fibonacci level at $46.04. Taking out this level won’t signal the start of long-term downtrend, but it will be a strong indication that the selling is greater than the buying at current price levels.

Short-Term Outlook

What can we really say except that buyers are trying to validate the old adage that the technicals precede the fundamentals.

The hedge funds are long and the bullish speculators have been coming in on the sharp breaks, while ignoring every attempt to kill this rally with headlines warning of lower demand due to the pandemic.

This week, the government inventories report helped boost prices, while traders shrugged off a new COVID-19 variant in the U.K. and the shutdown of air travel in and out of the country.

Traders paid little attention to the rise in U.S. oil rigs and reports that OPEC+ is ready to raise production by 500,000-barrels per day starting January 1 with most of their attention seemingly focused on the rollout of the vaccines.

The technical trend and momentum tools are indicating a strong upside bias, but some oscillators are signaling overbought conditions. I like to follow the trend. The overbought oscillators are coincidental. Overbought in my book means the buyers have stopped buying. It doesn’t mean some line has hit a level close to 100.

The market will stop going up when the buyers stop buyers and sellers start taking control. Trade the trend until proven otherwise. The trend changes to down on a move through $46.16.