Support for oil hints at crude awakening
WA Today, 5 March 2014
The oil market seems set for some action, according to this week's chart, produced by Mark Umansky, a certified financial technician and a councillor with the Australian Technical Analysts Association.
Oil, like many markets, reached an all-time high of $US140 ($155) a barrel just before the collapse of Lehman Brothers unleashed its tsunami on the financial world. Then it fell for seven straight months to reach a low of $US41.68 in January 2009, when professional support reappeared in the market.
That collapse was followed by a steady rise till April 2011 when resistance was encountered at about $US113.93 a barrel. Since then the price has been moving in a horizontal channel with upper resistance at $US113.93 and support at $US79.20.
This calendar year another positive sign has emerged for the oil market through the direction of the ''Stochastic Oscillator'' line at the bottom of the chart. The oscillator is an alternative measure of momentum calculated on a different basis to the moving averages we usually use.
In this case, the rising Stochastic Oscillator, in conjunction with the rising support level, indicate growing professional support for oil with further price rises likely. But as always, let caution rule the day as the chart measures the past not the future. However, the resistance and support levels on the chart should help provide guidance.
Should the price break the $US113.93 resistance level, technical analysis suggests it should re-test the all-time high at $US140. But should it fall through the $US79.20 level and the second support level at $US71.92 it could re-test the lows of 2009.