Crude finds multiple new highs

March 8, 2016 12:25 PM

Crude oil pushed above the 100-day moving average for the first time since early November this morning. We hear from Reuters that Venezuela, Mexico, Colombia and Ecuador (RTRS) are getting ready to meet about crude oil prices in Quinto on Friday.

All this is good for crude, but I did find it rather interesting that the 10- and 30-minute and hourly and daily charts all showed a seventh new high at the same time only minutes ago. A seventh new high in my candlestick analysis is a first area of ‘overbought’ (oversold) conditions warning. We have seen trends find many more new highs (lows), but we are advised to become more watchful following a series of 7 or more.

That said, the objective of $35 per barrel anticipated from the recovery above $30 has been achieved and the next target from my view is near $44.

Conditions across asset classes are consistent with renewed ‘risk-on’ interest. We find stability in oil prices a very strong basis for additional support for global equity prices. Additionally, as weak equity prices were noted to be a headwind against the otherwise financially supportive policy rates, until most recently the Fed had been priced for additional policy firming only as soon as late this year. That too changed with above mentioned stability.

Any disruption in the "repair" in oil prices could upset this turn to "risk-on." Even a modest $2-$4 decline from current levels would be enough to give voice once again to more conservative investment styles.

Since I started writing this note, the 10-minute chart has shown a reverse from the seventh new high. The 30-minute chart has shown a bearish 'harami' following its 7th new high and the hourly chart also sports a bearish "harami." The daily chart still indicates strong conditions.

About the Author

Martin McGuire, managing director at TJM Institutional Services