These 3 Charts Prove Oil May Be Bottoming

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These 3 Charts Prove Oil May Be Bottoming

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It is hard to argue with the fundamentals in the energy market. Supply is huge and, with an economy that is poised to do well but seems stuck anyway, the demand side is not compelling.

However, history shows us that sometimes the market itself is a better predictor of what is going to happen in any industry or commodity.

And right now, there are a few changes in and around the energy market that suggest things may be turning around under the radar.

Russia

Russia ETF

Russia is a major exporter of oil and it had a rough start to the year. However, it started to rally in June and the VanEck Vectors Russia ETF(NYSEARCA:RSX) gained 21% since then. Further, it virtually erased its entire loss from the start of the year. The energy sector in the U.S. is still down nearly 14% year-to-date. Crude oil is down about 14%.

Oil Refiners

Oil refiners make their money on the difference or spread between their crude oil input costs and the wholesale price of the gasoline and other products they produce. Right now, both gasoline and heating oil prices are rallying after bottoming in June. That suggests the products markets believe, at least in part, that crude oil is likely to move higher.

Phillips 66

Phillips 66 (NYSE:PSX) is a domestic refiner and it is representative of this strong group. One technical indicator that is especially strong is on-balance or cumulative volume. This keeps track of volume traded on up days minus down days. The theory is that aggressive buyers will demand more shares than aggressive sellers will supply. We interpret that as money flowing into the stock and for Phillips the indicator just hit another new 52-week high.

Sentiment

No doubt, most “experts” believe the world is “awash in oil” and OPEC is no longer effective in controlling price. They cite rising drilling rig counts since last year as a bearish item that can potentially keep supplies high.

They also called the post-hurricane rally unsustainable for reasons that do not matter. What is important is that the general consensus is that energy remains in a bear market.

Crude Oil

Even on the charts, analysts talk about the declining trend in place since February with its unbroken trendline. However, the 50-day average, which is a good proxy for the short-term trend, is already starting to turn higher. And as with the refiners, money is flowing into the market to indicate more demand.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/oil-prices-bottoming-charts/.

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