$50/b oil not significant, according to the chart
- Brent crude hit $50/b overnight, and WTI reached just shy of that
- Round numbers are sometimes significant, but not this time, the charts show
- Aug-Oct 2015 oil recovery failed, as did another push through $50 in early November
- $50.91/b is more important than $50 for Brent, and above that $54.05-32 a big area
- Brent is travelling higher in a channel, with resistance at $51.57/b
As a technical analyst, I do sometimes take note of round numbers as there's obviously something "psychological" about hitting these numbers. But quite often previous price action and the current chart tell me "forget it" and that there's more important levels to worry about, and this is one of those times. I've been telling my clients for days now that oil will likely hit $50, but don't get excited about this being an "event" as far as the chart is concerned.
In fact, one of the reasons I'm saying this is because we saw a recovery last year in August through to October. And where did this stop and reverse? The August high was $54.32/b but that was soon given back, and we had another go through $50 in October which failed at $54.05/b. Then one more push in early November failed at $50.91/b.
So $50.91/b is more important than $50.00 for Brent, and above that $54.05-32 looks like a big area. We are also travelling higher in a channel, and today this channel has resistance at $51.57/b, so there's another reference level above that looks to be more important than $50.
July '16 is also the front-month WTI crude contract (benchmark in the US), and, as I said above, it fell just shy of the headline-grabbing $50 overnight. Again if we look back to the last time WTI was up here (WTI didn't perform as strongly as Brent on last year's attempted recovery trades), we see that last October's high was $50.92/b. So it got through $50 last October, got everyone excited, then promptly reversed, and with a few days it was trading down in the $47s, and it's taken nigh on eight months to get back here (via a low at $26.05/b).
Brent daily continuation showing the channel and last year's highs
Brent weekly continuation - Says price can go to $60.95/b
WTI daily continuation