Technical analyst and newsletter writer Clive Maund lists the reasons he believes oil prices, which recently peaked above $50/barrel, are headed for a fall.
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It still looks like oil is topping out here at about the $50 level after its substantial recovery uptrend from its February low. While we cannot be sure until it breaks down from its uptrend, the chances of its doing so soon look high for various reasons.
One is that the current intermediate uptrend has been going on for a long time now and has resulted in a persistent overbought condition. Another is that it is quite some way above its 200-day moving average, which, although it has turned up, is still only rising gently. Another is that it has arrived at resistance at the upper boundary of a trading range that developed last fall. Still another is that its latest COT looks bearish, with Commercial short and Large Spec long positions being at their highest for about a year (see chart above). Finally, the broad market looks ready to roll over after its rally up to resistance of recent days, and if it does, it is likely to take oil down with it, probably against the background of a continued rise in the dollar.
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The 1-year chart shows that the advance has brought Light Crude up to a zone of significant resistance, where it appears to be stalling out. This is a good point for it to turn down again, probably in tandem with the broad market. . .
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A factor that has supported oil prices for much of this year has been the persistent “contango,” which means that prices for future delivery of oil are significantly ahead of spot …read more