Crude Oil Forecast October 16, 2014, Technical Analysis
Light Sweet Crude
The light sweet crude market as you can see fell during the course of the day on Wednesday, and even tested the $80 level. The resulting support and that large, round, psychologically significant number caused that the market turned back around and form a hammer though, which of course is a very positive sign. A bounce from here could send this market looking for the $85 level, but we do not think that the market will be a will do break above $86 as it seems to be the top of the cluster in that area.
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On the other hand, if we break down below the $80 level, we see nothing to stop this market from going down to the $75 level given enough time. However, the market is oversold by just about any metric you use, so a bounce is probably necessary at this point in time as the oversold condition should continue to threaten to break this market apart.
Brent
The Brent market fell during the course of the session on Wednesday, testing the $84 level and breaking through it. Because of this, the market looks as if it is destined to go to the $80 level given enough time, and then possibly bounce from there. With that, we are very negative of the Brent market and realize that the market should continue to offer supportive candles in this area in order to bounce enough to create “value” in the US dollar, and we do not think that the market can break above the $90 level.
Ultimately, the market looks very bearish but just as we set in the light sweet crude market, it appears that the market is rather soft but oversold. That oversold condition should continue to put pressure on the market in the longer term, but a bounce might be necessary in order to pick up the momentum to go lower again. We have no interest in buying this market though, as this would be akin to “catching a falling knife”, one of the worst things you can do in the trading world.