Technical analysis of UKOIL
Both main benchmarks for crude oil have continued to move up so far in March, reaching higher highs. Demand for crude around the world has now recovered almost to where it was this time last year, while OPEC+ is unlikely to make any significant changes in the near future to its current policy of cutting production. Conversely, there are signs that shale production in the USA is increasing, with Baker Hughes’ rig count having increased slowly and steadily since the start of the fourth quarter of 2020. This technical analysis of UKOIL looks at the daily chart plus futures and annual futures.
The most likely immediate resistance here is the psychological area of $70 which price is currently testing. Low support might occur around $36.60, which was last tested in the middle of November last year, but various areas from moving averages and Fibonacci are likely to be more important before price might approach this distant zone.
Technical indicators on UKOIL D1
Moving averages continue to give a strong buy signal, with all three of the 50, 100 and 200 SMAs successively above slower lines and below the price. The 50 SMA from Bands has extended above the 100 so far this year after completing a golden cross on 11 December. The first key support from moving averages is the 50 SMA, while below this the value area between it and the 100 SMA might be likely to cap a deeper retracement unless there’s a significant shift in fundamentals and sentiment.
As of this morning, price is no longer overbought based on Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter though at about 76 is very close to the trigger zone for buying saturation. Volume has increased significantly over the last few days, with a bias towards selling so far this week.
Price action and Fibonacci
The fundamental uptrend since late October is very clear on this chart, with minimal phases of liquidity-based losses since then. There have been no clear traditional patterns in 2021 so far, although the upward three soldiers from 3 March would traditionally be taken as a strong buy signal on this timeframe. The caveat here is that buying the tops is not normally a sensible approach for the average trader unless they focus on the very short term.
Last Thursday, price broke through the 100% weekly Fibonacci retracement, i.e. full retracement of all losses since January 2020, without much pause. However, on the very high timeframes like weekly there is no proof yet that this area has been left behind. The 100% Fibo is an obvious short-term support; below this, the 38.2% zone of the weekly Fibonacci fan is also in view as a possible support.
Futures on UKOIL
This chart of futures on Brent (MOEX, continuous with current contract at front) displays a fairly similar picture to the spot CFD. Here, though, data on volume is much more representative of the larger market, and they show basically the opposite signal from the CFD’s chart above. Buying spiked after the latest small consolidation, while selling has generally been much lower in 2021 so far.
Annual futures on Brent
The Intercontinental Exchange’s futures on Brent display a reverse contango into next year. This would traditionally be taken as signalling a correction or consolidation and the price of the first available contract having overextended. This signal might well be reliable for traders of the CFD focussing on the medium to long term, but larger concerns about not buying the tops remain more prominent.
Technical analysis of UKOIL: summary
Overall the technical picture for Brent remains very positive and more gains seem to be likely over the next few weeks unless there’s a significant change in sentiment and OPEC+’s policies. However, trends don’t normally continue without pausing for as long a time as this, so a consolidation seems to be favourable based on signals of saturation and from futures.
The key event coming up next month is the 15th OPEC+ ministerial meeting on 1 April. Before this, traders are likely to continue looking at regular stock data from the USA tonight and tomorrow and Baker Hughes’ rig count on Friday night GMT.
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