Wednesday, September 7, 2016

Oil To Start A Move Higher - That Can Affect The Fed

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*There appears to be a $40 OPEC floor.
*OPEC nations want and need $70-80 oil.
*We think oil may be breaking out right now.
*If oil is up into the Fed meeting it can change the Fed outcome.

We've written that there appears to be a $40 OPEC floor for oil (NYSEARCA:USO)(NYSEARCA:OIL)(NYSEARCA:UWTI). We lowered our confirmation breakout point from $49.5 to $47 on Monday (Warming Up). We now lower it to $45.30. It is higher so we think oil is a buy. We think oil can start a move higher. With a floor nearby below and OPEC nations in pain and one-by-one aligning, there is visibility for a liftoff as well. If correct and oil moves up ahead of the FOMC meeting it could affect their decision to hike.
Let's first look at an oil chart.
We have a few lines here. The top one was our original breakout point. We lowered it recently. Today we say the lower level looks like a support-resistance line that formed this year. You can see a lot of action around $45.30.
Oil looks like it wants to break this downtrend and start moving up. The top end of the downtrend and the horizontal support-resistance meet at $45.30. Oil is currently higher. Holding above this level can bring momentum back into oil.
Oil being a commodity is its own most important analytical tool. The price tells you what the fundamentals are doing. Early changes in the price trend tell you and "predict" the news.
In this case we've already had some decent news that can change this trend. That news can support oil and send it higher.
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