Long Term Fibonacci Level Update in Crude Oil

Jan 31, 2011: 10:04 AM CST

What are the long-term Fibonacci retracement levels to watch on Crude Oil?  Did you know that oil is pushing right up against a major Fib level right now?

Let’s take a look at monthly Crude Oil to see this level and what the larger IF/THEN possibilities are at this time:

A quick long-term look traces the simple Fibonacci Retracement tool from the mid-2008 high at $147.90 to the late 2008 low at the $35.30 level – a significant and devastating move for oil during the worst of the 2008 recession/bear market.

Price paused nominally in late 2009 at the 38.2% level then rotated around that level through 2010, and recently the price has moved up to the 50% retracement at $91.64.

We’re seeing a similar pause at the $92.00 level – which is simply the ‘halfway point’ from the peak to the low.

I mentioned in a prior post about comparing structure of the S&P 500 and the Dollar (in terms of intraday divergences) and this is the same logic, comparing the S&P 500 and Crude Oil at key overhead long-term price levels.

Namely, the S&P 500 is coming up against 1,300 which is a simple ’round number’ and the far-ago prior price swing high (resistance) from August 2008.

Oil and Stocks are positively correlated and are both bumping into intermediate term resistance levels.

Thus, we would expect both markets to shatter up through their resistance together, or pause/retrace down at least temporarily here to some extent.

It is another way you can use simple Inter-market Analysis to see if one market confirms the other – or is facing a similar challenge or pattern/signal.

This is the type of logic I use in my weekly Inter-market Reports to members where I discuss the monthly, weekly, and daily charts of the 10-year Treasury Note, S&P 500, Gold, Oil, and the Dollar Index.

By doing this, you develop your own “Inter-market Thesis” of Cross-market structure and potential opportunities – and helps you see the bigger picture better than any single market.

As price comes into a major level, the “Will it Break or Hold” game begins, which allows for short and intermediate term opportunities – and risk management – at these levels.

For the S&P 500, the intermediate upside target changes to 1,450 and for Oil, if its similar resistance breaks, we could see a push to the 61.8% retracement level at $105.

And if sellers take these markets lower, there are plenty of potential downside support targets – namely from the weekly price and EMA levels in both markets along with earlier potential support via the same structure (EMAs) on daily charts.

We never know what the future holds – but we develop IF/THEN game-plan style ideas that we can trade/manage according to our risk tolerance/goals as new information comes in each day and week.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Responses to “Long Term Fibonacci Level Update in Crude Oil”

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  2. Brian Says:

    I am a bit confused on this crude chart. I show the low in late 2008 being 32.40 not the 35.38 you show. If the low is 32.4 the price has already exceeded the 50% Fibonacci level (set at the 32.40 low) last month, but is testing it again this week. Thanks

  3. Corey Rosenbloom, CMT Says:

    Brian, I'm using the Fibonacci tool based on StockCharts.com data for the West Texas Intermediate Crude contract – as seen above. Though it doesn't seem possible, different vendors/charting software can show slight differences in price, with respect to any adjustments to the historical data/cleaning that they do.

    Whether it's specifically Fibonacci-based or not, oil is having difficultly at the $92 level. A lot of times these levels become somewhat self-fulfilling as traders react – taking profits into them to reduce risk as aggressive traders short into them to put on risk.

  4. Brian Says:

    Thanks for clarifying

  5. Remi Online Says:

    actually it doesn't really matter how high or low the level is, the prices just keep rising..