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00:00All right it's time now for charting futures and here's Abigail Doolittle with out a doubt the big move today in the commodity complex as oil Abigail. He has indeed romaine. And what a wild day it has been for oil on the Iranian tensions escalating and escalating at the highs up 2 percent. But now take a look at the sell off that we have both for Brent crude or European crude down three point nine percent well below that seventy dollars a barrel mark. And New York crude or S.L. one down four point six percent headed to its worst day since the middle of September . Back below the sixty eight dollars a barrel mark. So we're going to be talking about what could be next for oil both in the near term and the long term with our trader. But first another influence on oil outside a fundamental supply pictures in the Middle East and here in the U.S. the dollar. Here's the dollar index over the last couple of years. And for the most part you see a beautiful uptrend in yellow is the 200 day moving average . It's rising. It tells you that the bulls the buyers of the dollar have been very supportive in this range consolidating the gains. However more recently we have the dollar index going right below that 200 day moving average. It's starting to flatten out. A lot of technicians watch for that as a sign of waning buying interest. And we also see that this overall trend channel has been broken. It suggests that maybe there's a little more weakness ahead for the dollar maybe a lot even. And that could perhaps be constructive for WTI crude and some of the other commodities at least in the near-term to talk about more about the dollar and to bring oil back into the conversation plus into. Bank of America Merrill Lynch. Thank you for joining us today. Thank you. And what do you think of the dollar. And then we're not doing a long term dollar trip. But there's another thing implications there. You had a 200 day average on there and that was great. If the 50 day average was on there would you'd see there was a death cross in the dollar at the end of 2019. And now on that day the two the average had a slightly negative slope. And in the past seven or eight times that's happened. The dollar's lower. OK. So Aaron broke that channel. Yes. There is a bearish bias. There is bears technical damage. We could be transitioning to a downturn in the dollar. So in theory that should be bullish for oil. So let's take a look at your relatively near current oil chart here in the Bloomberg terminal. Have a daily chart of WTI crude oil prices here. Now it doesn't take a technician or a genius to tell you that today's a bearish day for oil down four and a half percent plus that. But there are two reasons I've been driving oil prices higher. One the reflation trade after the U.S. China phase one trade deal progressed into these Middle East tensions . And what you can see over the course of the second half of 2019 is what we're calling a triple bottom pattern in the oil chart or this daily chart. And the rally in oil prices above this yellow dash line suggested that that triple bottom is in fact confirmed and that oil prices should extend in Q1 upwards of 70 dollars a barrel. Now to complement that was actually a golden cross the opposite of a death cross where the 50 day moving average crossed above the 200 day moving average at the end of 2019. This suggests about 70 percent of the time oil prices are higher 50 days later. That means there's still reasons to be optimistic for oil in Q1. However our bigger picture theme if we can go to the monthly chart. Yes. So if WTI for 70 in Q1 but this longer term chart that we have here the monthly chart of WTI crude which I'm not quite able to pull up. So I think that we're going to have some other folks assistance with this. And here we go. It's a great chart . That's why I took the machine a while. So here we have the monthly chart of WTI oil prices going back to the great peak in 2009. This downtrend is a 5 wave declining wedge. Our call in 2019 for 2020 is to patiently wait to sell the rip in oil prices . We want to see oil prices get up to that 70s dollars a barrel point because that is where double resistance essentially lies at that point. The risk reward becomes very very appealing . Considered downside in oil prices. Even something as drastic as a new 15 year low. So that was going to be my question because when I take a look at this congestion pattern the obvious target over the longer term would be 20 dollars a barrel. So would that be what you would be selling for. That would be confrontation. So we could say 20. It's aggressive now is aggressive. But look we even have on the bottom of this chart the net long positioning in the oil market over the long term perspective. And look how long the oil market has become . There's a little bit more room for for the speculators and the the bullish trade to get in. And then it's just really really stretched. And if the market turned with that much long positioning that could be a big sell off .

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Long-Term Oil Prices Headed Lower, BofA Merrill's Ciana Says

In this edition of "Charting Futures," Paul Ciana, BofA Merrill Lynch technical analyst, examines oil futures with Bloomberg's Abigail Doolittle on "Bloomberg Markets: The Close." (Source: Bloomberg)

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