Here’s what’s been going on in the oil markets…<\/p>\n
Since June, the price for a barrel of crude oil has gotten a lot more expensive. Oil has traded from a low of about $67 to $92 over the last 100 days or so. That’s an increase of over 35%.<\/p>\n
And as you might expect, such a move would start triggering overbought conditions in a number of technical indicators.<\/p>\n
But overbought readings aren’t a reliable enough signal on their own. When tracking a potential reversal, you need to see many pieces of evidence all lining up.<\/p>\n
That’s why we’re going to look at a chart of crude oil below. We’ll walk through three pieces of bearish evidence together.<\/p>\n
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First, we have an important resistance zone (red rectangle on the chart). This zone spans $91 to $94. The last time oil traded in this zone was November 2022. Crude ended up selling off over $30 per barrel before finding support in May 2023.<\/p>\n
Take notice of how prices are currently approaching the zone.<\/p>\n
The next piece of evidence is the resistance line (upper blue line) crude oil is approaching. Markets often trade within parallel channels. When prices approach the resistance line of such a channel, it can mark a potential reversal point.<\/p>\n
This resistance line is quite compelling. That’s because it lines up perfectly with the red resistance zone.<\/p>\n
The final piece of bearish evidence is the Relative Strength Index (RSI) on the bottom half of the chart. The RSI is flashing strong overbought signals, which occur over a reading of 70.<\/p>\n
As mentioned earlier, an overbought reading isn’t too meaningful on its own. But overbought conditions combined with a market heading straight into heavy resistance is a classic formula for a powerful reversal.<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n If crude oil does reverse, keep an eye on the lower support line of the channel near $84. That’ll be the first major target for oil bears.<\/p>\n
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