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Crude oil has had some large price
swings this year and another one may be on its way. This report shows the
seasonality of crude oil along with where oil is trading and what the oil
service stocks are telling us is likely to happen
going into year end.
Since WTI Crude Oil topped out in
September at the $100 resistance level (Century Number) many traders are
looking for a bounce or bottom to form in the next week. Historical charts
show that on average the price of oil falls during November and the first half
of December.
The charts of oil and oil stocks shown
below have formed patterns on both time frames (weekly & daily) that
lower prices are to be expected. If you did not read my Gold Seasonality
Report I just posted be sure to review it here: Gold Seasonal Report
WTI
Crude Oil Weekly Chart:
Here you can see that price tends to
fall going into Christmas and rallies during the last week of trading. This
price action falls in line with Dimitri Specks
seasonal chart providing us with insight as to what we should expect. Later
this week I will finish my report on the Election Cycle Seasonality report
which shows weakness in the market during Oct & Nov when a president is
up for re-election.
Oil
Services Stocks – Weekly Chart:
If you follow oil closely then you
know likely know already that oil related stocks can lead the price of oil by
a couple weeks. What this means is that if big money is flowing into oil
stocks (bullish price patterns with strong volume), then you should expect
the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or
sideways oil price should be expected.
The weekly chart oil stocks show a
very large bearish head & shoulders pattern. While I do not think the
neckline will be broken it is very possible.
One of the most important pieces of
data on the chart is the VOLUME. Notice the lack of it… Volume tells us
how much interest and power is behind chart patterns and declining volume
clearly tells us these investments are out of favor currently and that big
money is not moving into them.
Oil Services Stocks
– DAILY Chart:
Zooming into the daily chart of the
oil service stocks we can see there is yet another bearish pattern unfolding.
Another head & shoulders pattern which looks as though it is just starting
to breakdown as of this writing. Next support level
is $35-36.
WTI
Crude Oil and Oil Service Stocks Trading Conclusion:
Looking forward 1-2 months (November
– December) taking the seasonal price swings in oil, re-election cycle
seasonality and price action of oil stocks I feel oil will trade sideways or
down from here. With that being said, expect crude oil to rally during the
last week of the year. I hope this provides some useful info for your
trading!
Get my Daily Trading Analysis & Trade Setups at:
www.TheGoldAndOilGuy.com
Chris Vermeulen
Editor, the
Gold and Oil Guy
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