WTI Crude & Nat Gas – Long Term trends & Critical Levels

Natural gas may be warming up, in anticipation of warmer temperatures. NG’s price trend seems to be in that typical 24-26 month cycle which we have seen from 2010. We are probably in that 2 year bullish trend that started in early 2016, after those abysmal lows we saw in 2015. Also, NG may be nearing a major milestone soon – the 50 month moving average. A break above that critical level could help NG run up a bit before we start hearing preliminary winter forecasts that could define the next phase. Here is a LT chart for NG. While 4.50 seems possible by the year end based on this LT chart & prior cyclical trends, another drop to the 2.80/2.85 levels cannot be ruled out based on short term charts.

NG Aug 21 -2

Crude, on the other hand is still in the long term bearish trend that developed ever since it dropped from the lofty 150 levels. Nothing much has changed in terms of trend-based technicals though OPEC has been trying its best to fight the glut with some action (in terms of output cuts) and words but markets are not really enthused. With every recent monthly report showing increased production from OPEC, markets have lost hopes on a concerted action from OPEC as SA seems to be the only one trying to keep up the promise of cuts. As forecast by many in early 2017,  WTI crude has stuck to the range of 40-55 so far. Now we have another major thing happening on the LT charts.

Take a look at the chart below – the 50 month MA is about to cross below the 200 month MA. Though MAs are lagging indicators, this cross over could overshadow the charts for a few more months at the least. And the Resistance at the 25 day EMA (orange line) & the prior high of 55 might be able to keep the bulls restrained for some time. The short term trend line is broken and points to more trouble ahead for WTI.

WTI LT Aug 2017

So I would stick with the earlier bearish forecasts with targets of 42 & 39 for the Fall, as long as the problems in Venezuela do not force the US or other countries to impose sanctions or an oil embargo on Venezuela. (WTI is once again running above 48 as I write this, probably in anticipation of those sanctions to be announced soon).  If the 50 MA / 200 MA cross happens (we will know that in a month or two), and the Venezuela stuff ends in some compromise & not an embargo, then we may be really looking at 33-35 by the end of the year / early 2018. Didn’t Trump say he wanted cheap oil? Venezuela will be a test for him now.

 

About Venkat Pulakkad

Entrepreneur, management consultant, blogger & forecaster. Founder of Flourish Research Media that provides insights on markets, trading strategies & risk management. Currently an active trader with 20+ years of experience trading Forex, Stocks & Options. Areas of interest: Trend / Swing trading, Macro-tech analysis, building trading strategies, deploying Risk Management techniques, and helping / coaching traders to become successful traders. Twitter link: https://twitter.com/Flourish_Venkat      
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