Price of Crude Oil Expected to Ease

The price of crude oil has been in a roller coaster ride in these two years. The price of oil was at about US$60.00 per barrel in April last year and a strong bullish started that month. The price of crude oil shot up as high as US$144.00 in July this year. Price always falls faster than when it goes up. The price of crude oil is currently back at its level in April 2007 last year. It took about 15 months to go up from US$60.00 to US$144.00 and four months to come back to US$60.00.

The price trend of crude oil can be tracked by a 20 week moving average. The trend was up from July 2007 until August 2008. The 20-week average is currently at US$97.80. At US$58.00, current price is 40% below the average and this is considered highly oversold. Normally price that is 30% below the average is considered oversold. The weekly Relative Strength Index and Stochastic indicators which indicate overbought/oversold levels are also indicating high oversold levels as the readings are below the oversold level of 30.


Weekly Light Sweet Crude Oil chart as at 17 November 2008 using NextVIEW Advisor

Price may have find support at US$50.00 and it is difficult to see it go below US$50.00. In the near term, a technical rebound is likely to happen. The current highly oversold levels may cause the price of crude oil to rebound and find resistance at US$77.00. Price is expected to trade at this support and resistance range.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.