Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: Crude Black Friday Sale 

By Fawad RazaqzadaCommoditiesNov 26, 2021 13:02
uk.investing.com/analysis/chart-of-the-day-crude-black-friday-sale-200503429
Chart Of The Day: Crude Black Friday Sale 
By Fawad Razaqzada   |  Nov 26, 2021 13:02
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com.

Concern that a new Covid variant will prompt fresh mobility restrictions and hinder the economic recovery, has roiled the global markets today. Every risk asset you can think of has fallen, with crude oil and travel stocks taking the brunt of the sell-off.

Although we know very little about the new Covid variant, and it hasn’t spread very far yet, investors have taken decisive action. Experts’ alarming warnings mean it has the potential to hit the global economy very hard.

Cases of the existing Covid variants have already soared across Europe, prompting a number of countries to introduce restrictions to slow the spread of the virus. But the new variant adds a degree or two of urgency as it has “a large number of mutations,” according to the WHO, implying that it may be resistant to the current Covid vaccines.

Already, the UK has announced a temporary flight ban from a number of southern African countries. If more countries follow suit, we could see demand for air travel fall. This is why airline stocks and crude prices have slumped today. 

While we don’t know how infectious the variant may turn out to be, and whether the current vaccines will be effective against it, the slump in crude prices comes just as the US and a few other oil consuming nations are releasing crude from their strategic reserves to add output to the global supply. 

Until today, the feeling among market participants was that the OPEC+ group will stick with the policy of raising output by 400,000 barrels per day at its meeting next week. However, the potential for more lockdowns means demand in Q1 could fall sharply, raising the prospect of the OPEC+ potentially holding back supply.

Therefore, the downside could be limited from here ahead of the OPEC+ meeting on Dec. 2 and with oil prices having fallen nearly 15% from their multi-year highs hit in October. But that’s not to say prices won’t weaken a little further over the coming days, especially if worries about the new variant of Covid intensify. So, the upside should be capped until at least the OPEC+ meeting on Dec. 2.

Oil Daily
Oil Daily

Several support levels have been broken, making crude oil a candidate for bearish speculators to target. The turning point was when prices failed to hold above $80 per barrel, a key psychologically-important level. Since then, we have seen a series of lower lows and lower highs form. The path of least resistance is thus clearly to the downside for the time being. As such, I would favour selling into rallies near resistance than buying the dips at support, over the next few days.

One such resistance area to look out for is around $75.00 to $76.00 area. This was support on at least a few occasions since prices broke above it in early October. Once support, it is likely to be strong resistance going forward since prices have failed to stay above it. 

On the downside, the area around $73 is important to keep an eye on for interim support. While today’s selling may be overdone, it is possible crude oil prices may drop further lower towards an even stronger potential support zone, which comes in between the $70.00 hurdle and $71.00.

This area was the base of the previous break out that sent prices to fresh multi-year highs. It is a demand zone, in other words. In addition, a bullish trend line, derived from connecting the lows in November 2020 and August 2021, converges with the 200-day moving average. The 200 MA is still rising and as such it indicates objectively that the longer-term trend is bullish. 

Thus, when it comes to trading crude oil and if you are going short, it is prudent to take at least some profit every time prices slip sharply, as you are betting against the longer term trend. It is quite possible that soon the selling could end, as the market is still very tight and the widespread lockdown traders fear may not materialise. 

Chart Of The Day: Crude Black Friday Sale 
 

Related Articles

Anastasiia Scavo
Gold Is Looking for a Rally By Anastasiia Scavo - Oct 22, 2021 1

When I was recently looking at the gold prices chart from the perspective of the coming months, I saw minor indications that prices may break through the strong resistance around...

Chart Of The Day: Crude Black Friday Sale 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Alex Malmström
Alex Malmström Nov 28, 2021 13:59
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Up she goes again!
Richard Collinson
Richard Collinson Nov 26, 2021 23:12
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thin liquidity couplr with panic means these moves are overdone
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Continue with Google
or
Sign up with Email