Crude oil tumbled quite significantly, carrying CAD on the way. However, the team at Bank of America Merrill Lynch see some bullish divergence there:
Here is their view, courtesy of eFXnews:
February WTI crude oil futures breaks $30 a barrel for the first time since 2003. Now momentum is diverging signaling a short term sign of strength after price tested support below the psychologically significant round number of $30.
Our bearish view last published on December 7th eyeing $32 was reached and $28 remains. According to Market Profile, we see the next major level at $28.00. The weekly chart pictured next presents what may be a longer term bullish divergence.
Long term bullish divergence forming. It takes time for a 3 troughed weekly bullish divergence to develop and it is attempting to form here. We are watching closely as this can be a significant indication that crude oil is nearing the bottom. If crude oil bounces, then it would be the third time in a row a low is made with less downward momentum. Then the question becomes can crude remain above $30 and is a bottom really forming.
Crude oil’s next long term level is $28. The long term range extension from market profile suggests the Point of Control from the 2000 – 2003 distribution that aligns with the resistance highs of 1992-1999 is the next major level under $30 a barrel for WTI futures. Market profile also develops support at $23.
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