Oil May Rise Only as Far as $80 Fibonacci Resistance: Technical Analysis
A worker works on a oil pump at an oil field. Photographer: Jeyhun Abdulla/Bloomberg News
Crude oil, which fell the most in more than three weeks yesterday, remains in a rising channel on technical charts and will continue to face resistance near $80 a barrel, according to Societe Generale SA.
Oil for September delivery in New York will be capped at the 50 percent Fibonacci retracement of the contract’s drop in May, said Stephanie Aymes, a cross-commodity technical analyst at France’s second-largest bank by market value. This is in a band near $80.82 a barrel, where a rally from below $70 stalled on June 21.
“As long as $80.45 to $80.85 remains resistance, the next move will be on the downside,” Aymes said in an Instant Bloomberg live-chat message. “Daily indicators are range-bound, not far from resistances.”
Oil, down 3 percent so far in 2010, fell yesterday amid concern a drop in consumer confidence in the U.S. indicated fuel demand in the world’s largest economy would falter. September futures were at $77.18 a barrel in electronic trading on the New York Mercantile Exchange, down 32 cents, or 0.4 percent, at 11 a.m. Singapore time.
Crude may be supported around $76.90 a barrel, the bottom of the upward-trending channel going back about three weeks, according to Societe Generale. If support is breached, “consolidation” may take place at $75.60 to $76.15 and prices may fall further to $74.35 to $74.70, Aymes said.
Oil’s decline yesterday came a day after a so-called Doji, a formation that confirmed a bearish chart pattern. The Doji, created when prices settle at the same level for two consecutive days, was the first for New York crude since September.
The Fibonacci sequence, identified by Italian mathematician Leonardo Fibonacci in the 13th century, is used by traders to predict points of support and resistance as a market retraces earlier movements.
To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net
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