From my view, we are getting close but are just not yet near what could be a meaningful multi-week or month bottom in crude. With current sentiment and oversold readings we could in the short term see some spectacular multi day or even week long bounces worth playing, however, longer term support for crude could reside at prices about 10-15% lower.
The primary rationale for this is what i believe is a confluence of targets that align in the $49-$52 range in crude.
Confluence of Targets: 1. 16 yr rising trend-line @ $50-51 2. .764 retrace of the 08' low to 11' high @ ~$52 3. Descending wedge breakdown PO target @ ~$49-50
Weekly RSI is down around 12.3, one of lowest readings over the past 30 years. With that we may see a bottoming of the RSI occurring this month with a new price low and higher RSI reading occurring after the new year. Possibly similar to the 2008 collapse where weekly RSI bottomed in Nov-08 with price bottoming in Jan-09 at much lower levels.
Do you have a target in mind if the levels you marked are taken out? Retest of the 08 lows?
CommoditiesTrader
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It's kind of a toss up in a sense. I think just on the supply/demand situation, we can see 45/bbl. I also think oil at that level for sustained period of time will cause havoc of various markets which could push oil to 2009 lows. I believe the stronger dollar continues until the Fed starts QE4 because inflation is the name of the game, but that could actually be what pops the equity bubble through loss of confidence. If and when the dollar declines, which could see inflated oil.
In the near-term, below $53.50, $45 is a reachable target. While a correction above $59 could have prices bounce to mid-to-high 60s. Fundamentals still drive it, I think.
Even if supply is cut, there is unlikely to be an equilibrium. Demand drives price IMO, not supply. If supplies are cut but demand still remains low or even decline, then barrels will still accumulate, just more slowly.
SMP99
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Well said, can't really disagree much with that. It will take some time to see how much supply is reduced in response to these prices. My initial thought when i posted this was a bottom in Jan that could last at least a few weeks to a few months. Any re-test or drop below that level would like you said depend on several factors including a strengthening dollar or demand +/-. Dollar seems poised for a continued run and that may provide a bit of headwind for crude prices.
tradingview.com/v/cIzL2sOM/