BLBG: Oil to Hold Above $75 as Rising Pattern Stays Unbroken: Technical Analysis
Crude oil, set for the biggest weekly drop in six, remains in a rising pattern on technical charts that will keep prices above $75 a barrel, according to National Australia Bank Ltd.
Oil, down more than 5 percent in New York this week, is still within an upward-sloping channel going back about three months, said Gordon Manning, a Sydney-based technical analyst at Australia’s fourth-largest bank. Prices may also sustain a rebound because yesterday’s settlement was above a Fibonacci support level.
“This selloff we’ve seen is just saying we are still basically in a very nasty range,” Manning said today in a telephone interview. “There’s not enough evidence that says to me this is going to turn into something really big.”
Crude slumped to a one-month low this week amid concern the global economic recovery would stall and damp fuel demand. Futures for September delivery on the New York Mercantile Exchange were at $76.20 a barrel at 11:20 a.m. Singapore time, after rising as much as 68 cents, or 0.9 percent, in electronic trading. Prices are down 4 percent in 2010.
Oil traders may be repeating a “panic selloff” in late June that prompted a 10 percent tumble, according to Manning. Following a decline to around $71 a barrel, the market rallied 17 percent to almost $83.
‘Everyone’s Panicking’
“We’re going to increasingly see this sort of panics, particularly to the downside, that just don’t have anything in them,” he said. “Everyone’s panicking but we’re still in a range. The pattern is not convincing that we’ve made a top and we’re going to collapse.”
In the coming week, oil may be supported around $75 to $76 a barrel, the bottom of the uptrend channel, Manning said. That’s close to the 50 percent Fibonacci retracement of the decline from May 3 to May 20 at $75.69. Futures yesterday settled a nickel above that level.
Oil may stay in an uptrend even if prices settled under $74 a barrel, he said. The market will probably “get bad” only below $72, a level last traded on July 7.
“Ranges are awful because people get antsy and they want an answer, but there is no answer because you’re stuck,” Manning said. “It’s like driving down a highway and going ‘I want to turn a corner,’ but there’s no corner to turn around because you’re on a straight road.”
