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Oil: After A Failed Breakout, What Next?



  • The Federal Reserve provided the bears with some much-needed support.
  • President Trump’s State of the Union address has caused some confusion in the oil market.
  • The recent downswing in the crude oil market is highly correlated with the release of bearish economic data around the world.

In my last article on 8th January, I had highlighted that the price of Brent oil (BNO) would rise till the upper line of the box range pattern after which it shall trade sideways. This belief of mine proved to be true as by 11th January the price of Brent oil had risen till the $62.52 mark, after which it traded in a sideways pattern as expected. This is as the commodity could not have a clear breakout above the resistance level. On the other hand, I stated that I expect the price of WTI crude (OIL) to rise till the 161.8% Fibonacci resistance level as this was the upper line of the box range pattern. This proved to be true as the commodity reached the 161.8% Fibonacci resistance level by 18th January after which it entered a sideways pattern as expected. Thus, the big question now is whether the incline in oil prices has come to an end or not. Hence to establish this, I shall look at the fundamental news affecting oil, whilst also analysing the charts using technical analysis tools.

Fundamental news

Dovish Federal Reserve:

I expect the dovish position taken by the Federal Reserve to give a boost to the oil bulls in two ways. Firstly, I expect the lower-than-expected interest rates to provide a bullish jolt to the American economy, which will help the stock markets have a rise. Secondly, I expect the softer rate outlook to help undercut the greenback in the international market. This in turn shall strengthen crude oil demand in the rest of the world. However, I do not believe the bullish impact of this shall be felt now. I say this as it shall take some time for the new demand levels to kick in.

Trade talks:

Crude oil traders

This article was written by

I am a finance and investment professional whose prime focus is on the British, Indian and American financial markets. I specialise in technical analysis with my key area being Candlestick pattern analysis and Fibonacci analysis.  Academically, I posses two masters degrees one is a Masters of Science in Finance degree from the University of Portsmouth, United Kingdom and the other is a Masters of Commerce degree specialising in Accounting. My Bachelors degree is in Economics, Finance and Banking from the University of Portsmouth, United Kingdom.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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