Introduction - Spinning Tops
There is a Japanese candlestick called a "spinning top." This pattern has a relatively short real body with long upper and lower wicks or shadows. These are candles of indecision. Effectively, bulls have tried to take the price higher and were rejected; bears tried to take the price down but were dismissed, with relatively flat prices at the end of the period.
Weekly Oil Charts
The chart on the left is FCXM's Brent CFD, UKOil, and the chart on the right is its WTI CFD, USOil. Over the last two weeks, the price action indicates volatility, with prices reaching a high of $133.10 for UKOil and $129.41 for USOil before being sold down aggressively. The lows for the period were $96.90 and $93.50, respectively.
This price action is represented by candles 1 and 2 for UKOil and 4 and 5 for WTI. We can combine candles 1 and 2 into a single candle, 3, and candles 4 and 5 into candle 6. We note that candles 2 and 5 are still complete, which may affect candles 3 and 6. However, as currently combined, candles 3 and 6 are "spinning tops."
From the spinning tops, we see uncertainty in the energy market. This indecision is not surprising. The markets keep a keen eye on the talks between Russia and Ukraine, and little progress has been made so far, with Russia continuing to bomb Ukrainian cities. As a result, the prospects of further supply shocks and increased sanctions support crude. Unless these fears are alleviated, the possibilities for higher energy prices remain. This heightens the chance of stagflation, particularly in Europe, which is much more reliant and Russian energy than the US. Nevertheless, we cannot dismiss global risks or contagion.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.