FUNDAMENTAL & TECHNICAL ANAYSIS OF CRUDE OIL PRICES

In: Journal of global economy, Band 17, Heft 1, S. 3-20

Abstract

The human mind is not as good at processing large amounts of information as we might like. Psychologists have shown that human beings are only able to juggle small numbers of related and often conflicting pieces of information without making judgment errors. As a result, individuals faced with the vast amounts of information available to support investment decisions often find themselves swamped by the enormity of the task; unable to see the wood from the trees. Technical analysis is a field of financial markets research that works to address the above problem by focusing on a single, commonly available, data source that reflects all known information and activity relating to all monetary securities- Price history. Technical analysts argue that as markets are efficient, prices reflect all known information and that they move over time as participants react to new information and changing needs.
As a result, the technical analysis of these price changes can provide real insight into the market dynamics and be used to develop trade strategies that exhibit superior risk/reward characteristics. While technical analysis approaches have developed significantly over the past few decades, some techniques are far more ancient. While their real origins are anonymous, Japanese candlestick charts have been recorded as being employed in the rice markets as far back as the 1600s. What is particularly interesting is that various of these ancient approaches continue to provide highly effective trading signals when applied to modern markets and securities.
Crude oil price volatility is in the midst of the largest business risk that oil and gas companies face. This is followed by unstable policy regime, managing costs and risks emerging from technological advancements. The high levels and rapid fluctuations of petroleum prices have become a great concern to individual consumers, firms, policy makers and society. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time. Hence, to mitigate the negative impacts of price volatility and to predict about the future price movement of crude oil and natural gas we can use technical analysis.
Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting price trends. The term "market action" includes the three principal source of action available to the technician-price, volume and open interest. This research paper highlights fundamental factor which affects the Brent price and analysed the factor which are highly correlated with Brent price and on the basis of the results forecasted the Brent price for next five years. Fundamental analysis of Brent oil, price pattern & movement of crude oil has also been carried out using candlestick technical tool.