Charts of the Week - Technical Analysis

USOIL – US oil stockpiles plummets and crude jumped by 2%.   

• Resistance Zone: $115 to $117
• Key Resistance: $110
• Major Pivot Point: $104
• Key Support Level: $95
• Support Zone: $90 to $88
• 200 Day SMA – Green Line
• CBOE VIX – Volatility Index @ 23.24 -1.45 (-5.87%)

Trade Insights

USOIL Chart shows viable long positions above the Key Support Level at $95 to head towards the Major Pivot Point at $104. And with the next target of $110 also the Key Resistance level.

Alternatively, Short positions below the Key Support Level at $95 to head towards the next support Zone at $90 to $88.

USOIL Chart Analysis:  Directional bias - 2 Weeks 

USOIL chart shows the pair is moving higher above the key support level at $95. Oil has been moving in a descending channel. After falling out of the Uptrend depicting ascending channel on 17^th June last month. The Oil prices tried to recover but it was a fake out. And the prices dropped sharply a little after by roughly about $12 to $14. Currently, the Oil prices are trading just above the Key Support level at $95 still within the descending channel limits. Could we see a breakout on the higher side is to be seen but at this stage, Oil is facing mild resistance at the current levels? It seems like WTI Crude Oil may put up a larger recovery on the chart in the coming days and push prices higher towards the resistance levels on the chart as new US economic data is coming out that may reflect a positive outlook for consumption. The prices may also get a push from the reducing US stockpile and increased demand would push the OPEC countries to increase production to fill the gap. Until then the prices of oil could continue to consolidate above the Key Support level.

After trading for some hours below the 200 Day SMA on 14^th July, which is also the February month low, the prices recovered sharply. They are now appearing to reverse the course upwards above the 200 SMA level.

Fundamental Overview:

Oil prices are gaining some traction and recovering due to improved demand in the US and lower crude inventories. Signs of robust demand in the US and data showing another sizable weekly drop in the US crude stockpiles and gasoline inventories are fuelling the prices higher. As per the data, the US oil stockpile dropped by 4.52 million barrels last week against the expectation of a drop of just 1.5 million. The reason behind the slump in US inventories is that the Biden administration has been relying heavily on its reserves and adding supplies to the market to ease the supply deficit created by the Russia-Ukraine war.