Crude oil’s rally to a two month high may sputter around $82 a barrel as the commodity’s relative strength index signals that gains have been excessive, according to technical analysis by MF Global Ltd. Oil advanced for an eighth day in New York today, trading above $81 a barrel for the first time since November, as freezing temperatures around the Northern Hemisphere bolstered the outlook for fuel demand. The surge will probably founder before it reaches last year’s peak of $82 a barrel, MF Global said in a report.
The relative strength index for crude oil indicates that prices may have overshot, according to the brokerage. An asset’s RSI is a ratio based on daily closing prices that measures how far prices have advanced or dropped during a specified period. An RSI reading of 70 or above typically suggests an asset has risen too far, too fast. The last 14 day reading for crude was 67.8, the highest since October. “Technically, most complexes are approaching the upper bands of the trading range,” said Edward Meir, an MF Global analyst in Connecticut. “Crude is approaching overbought territory. We find it unlikely that prices will take out $80.50- $82 resistance”.....Read the entire article.
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