A bullish ‘golden cross’ may be starting to form in crude oil


An earlier version of this reported provided an incorrect definition for a so-called golden cross. A golden cross is typically viewed as a bullish trend that occurs when an assets short-term average forms above its long-term average.

After taking a beating over the past several months, crude-oil prices may be on the verge of turning a corner, with a bullish chart pattern possibly forming in recent trade.

A so-called golden cross, which occurs when the short-term average crosses above its long-term trading average, may begin to form in West Texas Intermediate crude trading on the New York Mercantile Exchange. Oil CLN7, -1.94% had been trading firmly higher, until paring into the close and settling about 4 cents higher at $48.35 a barrel on Thursday.

Currently, WTI’s 200-day moving average of $49.64 a barrel is pushing above the 50-day moving average at $49.59, according to FactSet data.

But oil is experiencing a relatively narrow trading stretch in recent months, which has resulted in both trading averages converging, putting oil prices in a position to tilt into either a bullish or a bearish trend. A cross of oil’s 50-day moving average below its 200-day moving average would signal what chart watchers describe as a “death cross,” or negative trading momentum (see chart below, with the green line representing the 200-day MA, and the pink the 50-day):


Market technicians tend to pay attention to the relationship between short- and long-term price patterns to help determine an asset’s upward or downward momentum.

To be sure, crude futures’ fairly tight trading range still signals that oil’s trading trend could go either way and will be marked by volatile swings in the coming weeks and months.

Recent activity in crude, which has weighed on the S&P 500 index and the Dow Jones Industrial Average comes as the U.S. Energy Information Administration reported Thursday that domestic crude supplies fell by 6.4 million barrels for the week ended May 26, marking a two-month stretch of falling stocks.

That may be good news for oil bulls because surging U.S. output has raised some concerns that a pact led by the Organization of the Petroleum Exporting Countries and other major oil producers to curb production hasn’t been entirely effective. Since an OPEC meeting in Vienna last week, investors have tried to shake off their disappointment that oil producers, who agreed to extend output-limits ending this month to March 2018, didn’t enact more aggressive measures to curb output. Oil has settled in the red in four of the past five trading sessions.

Meanwhile, the energy sector, consisting of oil-related companies heavily influenced by the price of oil—as measured by the exchange-traded Energy Select Sector —has been the worst performer among the S&P 500’s 11 sectors over the past three months, down 9%.

Source: MarketWatch

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