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WTI to trade between US$55 and US$60 in Q1 2019

2018 was a tumultuous year for West Texas Intermediate (WTI) crude oil futures as the effects of Opec-led cuts, US shale production and geopolitical concerns led to massive fluctuations and increased volatility in prices.

The WTI demonstrated a bullish streak at the start of 2018 that led to a three-year record high in crude oil futures. A rapid turn of events in the fourth quarter led to a massive sell-off in crude oil futures as global oil benchmarks shed 45 per cent of market value from previous highs. WTI crude oil futures struggled to find a firm footing in the last leg of 2018 before finding a price floor at the US$42.35 mark on Dec 24.

So what's next for WTI crude oil futures in Q1 2019?

The appearance of a doji candlestick on Dec 24 illustrates a solid bearish rejection at the US$42.35 mark (WTI). The crucial support level of US$42.35 has held up on several occasions as market forces spurned bearish attempts over the past three years. The formation of a long candlewick in the weekly chart along with a sharp pullback of US$2 further supports the view of a bearish dismissal in the current term.

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The Daily Slow Stochastic Oscillator (5,3,3) has expressed a momentum shift in WTI crude oil futures as technical indicators demonstrate positive trading conditions. A reversion into healthy territory from oversold trading activities along with an ascending trajectory has suggested bullish inclinations towards the near future for the WTI crude oil futures.

The WTI price chart has since demonstrated a solid upswing from previous lows as pricing levels appreciated by 27 per cent on Jan 19. Market bulls look poised to target the next main station of US$55 though severe headwinds have resisted a bullish breakout for WTI crude oil futures on previous occasions.

The appearance of a doji candlestick on Dec 3 has supported our view for marked resistance as market forces suffered from bullish exhaustion on repeated occasions.

We see greater upside potential in WTI crude oil futures as technical indicators remain supportive of bullish trading assessments in Q1 2019. Key resistance level stands at US$55 while key support level remains at US$50 (key psychological level).

Should the positive trend scenario remain valid with pricing action executing for a bullish breakout above the US$54.80 mark, we can expect WTI crude oil futures to move towards the next main station of US$60.70 (EMA200).

  • The writer is an investment analyst at Phillip Futures.

Disclaimer: Chartpoint is provided by Phillip Securities Research for information only, and should not be construed as investment advice.