In our article “Oil Analysis: Finally, A Bearish Reversal?” on September 21, we drew attention to emerging signs that the initiative was shifting to the bears. This was noticeable in the changes in the dynamics of impulses and corrections, as well as in the analysis of the interaction between trading volumes and prices.
Since then, the bulls were able to update the high of the year on September 28, but the price did not stay there for long, falling sharply in the following days. Three bearish candles formed on the chart, which confirmed the problems of the bulls, and the double top pattern (A-B) also became relevant.
Another principle of technical analysis that emphasized the dominance of supply over demand is that each upward move was approximately 2 times weaker than the downward move. This can be seen in the consistent structure characteristic of a bearish trend:
→ the C→D move is approximately 50% of the B→C bearish momentum;
→ the rebound from the median line of the ascending channel E→F is approximately 50% of the bearish impulse D→E;
→ the bounce from the (now former) support line 87.50 G→H is approximately 50% of the bearish momentum F→G.
Yesterday, the US Energy Information Administration (EIA) reported that supplies of finished motor gasoline, reflecting demand, fell to about 8 million barrels per day, the lowest since the beginning of this year. The news contributed to the formation of a new bearish impulse, which broke through the ascending channel (shown in blue).
It is possible that another I→J rollback will follow. If so, then the formation of top J may be facilitated by resistance from the level of 87.50, the lower border of the ascending channel and the 50% Fibo level.
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