Monday's Market Minute: Oil Back On Familiar Ground

Oil bulls hoping for a breakout above the long-term consolidation range between 52 and 58 were disappointed last week after a sharp rejection near the top of the trading range. The /CL futures contract plunged over 4.6% on Friday, which may have been a rude awakening for traders expecting a sleepy shortened Friday to cap off the Thanksgiving holiday week. The move came after lowered expectations for production cut extensions from OPEC, sending prices into a free-fall and triggering a bearish MACD crossover.

Prices firmed up near the 50-day SMA and have recovered slightly this morning, but there are still some technical developments worth noting. The RSI has been making lower highs and lower lows since Nov. 15, suggesting bearish divergence from price. Meanwhile, the ADX is rising from a trough that formed on Nov. 27, which is typically a sign of a strengthening trend: downward in this case. Prices also stalled near the Volume Profile Point of Control, which is the price level at which the most trades took place during the past year.

Despite these technical developments, it’s unlikely that either bulls or bears will see much in the way of major movements until oil can break out of its longer-term holding pattern.

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