This week’s Chart of the Week is a follow up on the graph that we Tweeted (@KobeissiLetter) last week that was calling for a major reversal in the crude oil markets. The bearish technical picture has gotten even more bearish during Thursday and Friday’s trading sessions. This call is based on both fundamental and technical analysis. From a fundamental perspective, we see a market with far too much optimism about OPEC production cut extensions, overwhelming certainty about large increases in crude oil demand for 2018, and a soon to come abundance of U.S. crude oil supply due to WTI crude trading well above the $50 benchmark for shale companies to turn a profit. From a technical perspective, we have now seen the RSI for crude oil hit 73 which is eight points above the level that we saw the last four declines that averaged roughly 14%. This is indicating extreme overbought levels for the commodity and this is quite dangerous for all investors holding long positions. We are now calling for a pullback to the $47-$48 range and we are watching $53.03, $52, and $48.90 on the way down. Soon the fundamental bearishness will be realized by investors and the technical setup will be the catalyst for the decline back to sub-$50 WTI crude prices.
Farewell and Trade Well,
Founder and Editor-in-Chief