Is it time to Buy oil?
The United States Oil fund continues to see weak oil demand due to COVID 19 in an oversupplied oil market due to the Russia Saudi price war. Despite OPEC and other producers of oil agreeing to cut production it hasn’t been enough to raise the price. With oil at all time lows we’ll be looking at some technical details to try and better understand any underlying trends and what this might result in a buy for the ETF.
The Relative Strength Indicator (RSI) is a specific indicator that is used to detect if a stock is over sold or over bought. The RSI is calculated using average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. A reading of below 30 means the stock is oversold highlighting a bullish signal that the stock might rise in price. This the case with The United States Oil fund as the RSI is at 27 indicating that the EFT is oversold.
The Bollinger bands are an additional indicator used in technical analysis to detect volatility if the bands are close together then there is considered to be low volatility however if the bands widen then there is considered to be high levels of volatility. Also it is very uncommon for a stock to move outside the Bollinger bands if it does, it will more often than not shift back inside the Bollinger band. In the graphic above we can see that the Bollinger Bands have widened and for now that suggests that the price is more unstable and more volatile, again indicating that the price is likely to deviate from this price range. Also the EFT is slightly outside its Bollinger band this may lead to an increase in price to fall back into the Bollinger band.
The Moving Average Convergence (MACD) is a trend momentum indicator that shows the relationship in this case between the 12 day and 26 day moving averages. It is commonly used as a buy or sell signal and as it is in this case the MACD is about to cross above the signal line indicating a buy signal.
With all this said it seems that the overall technical analysis of United States Oil Fund is indicating a buy with many bullish signals. Although more fundamental analysis needs to be undertaken before it is clear which direction the United states oil fund will move, but from what we can see the united states oil fund is currently very in a very volatile position. We are very likely to see massive changes in this stock price, which can change daily due to any major changes or announcements made, such as the end of COVID-19. We can be clear that on a technical analysis stand point the united states oil fund is sitting in a bullish position.