Technical Outlook for the CBOE Oil Index

The CBOE Oil Index continues its spiraling downside trend without a clear technical indication to tell us on when it may stop and change direction. The next possible resistance level for the Index being 725 may be reached during the next sessions if the trend continues interrupted. Apart from what the chart is clearly telling us, several other indications are in place to believe the selling momentum is still strong. Among this indications, we may start with the pulse pattern going on right now - a down trend that gets interrupted for a limited period of time forming something like a small triangle, a peanut, a wedge or a "pulse." This "pulse" in technical analysis is considered to be a strong continuation pattern that may create even more pressure in the down side for Oil. Apart from the pattern, the indicators we normally use for trending formations are all showing selling power. MACD is trending in line with its underlying Index and RSI is well below the middle 50 level. Once Oil gets to the 725 mark, further analysis would be necessary to determine the likeliness of a further drop or a change in direction. The future for the price of Oil depends on so many external variables that is difficult trying to determine what would happen from a mere technical perspective. For now, the short term perspective is that the Index would continue trending down for a while, possibly with more strength given the "pulse" pattern and a whole new analysis would be made once the likely resistance level is reached.