Longterm View of Crude Oil since 1990

Mar 2, 2009: 11:11 AM CST

Crude Oil has come into a potential support area most traders might not be aware exists, but it’s evident from the long-term monthly chart.  Let’s see this structure and what might be in store for crude, barring any further unforseen developments.

Crude Oil Monthly Chart:


(Click for larger image)

Crude Oil ($WTIC as the benchmark index) has completed a seemingly perfect Elliott Wave pattern to the upside with a complete fractal 5-wave structure (not labeled) unfolding in the terminal 5th wave into mid-2008.  Price peaked at $147 a barrel and began a shocking plunge that took hedge funds and the general investing community by surprise (which was happily a boon to the economy in the form of lower gas prices).

Under this count, prices has completed a violent Wave A (correction) into a level of confluence support.  First, the rising 200 month moving average provided a floor that halted the downside pressure temporarily.  Second, this level – the $38 range – has served twice as key resistance (in 2000 and 2003) and according to the “Polarity Principle,” old resistance becomes new (future) support.  It’s possible that’s happening now.

In addition, the monthly close formed a bullish hammer candlestick on top of those support zones.  Is support certain to hold?  Absolutely not but Crude Oil is probably due some sort of counter-swing up perhaps to the $55 or higher level at a minimum.

Sometimes looking way back into price history can provide markers for possible support/resistance zones today.  Crude has the potential to do that from these levels.  Crude is experiencing sharp downside pressure today, so it’s possible the downtrend is just too much to overcome or that the economy is expected to be worse than expected… and it’s quite difficult to fight downtrends so do further analysis on your own.

Corey Rosenbloom
Afraid to Trade.com

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5 Comments

5 Responses to “Longterm View of Crude Oil since 1990”

  1. Jason Says:

    I agree Corey, $38 has been an important level, but shorter term it seems like it wont hold. I was thinking the same thing last week. http://tradingfinanza.blogspot.com/2009/02/crude-oil.html

    Also notice the weekly MACD. It actually gave a buy signal.

    Nice job with the Elliot Wave count and 200 DMA. I hadn’t noticed those yet.

  2. Jason Says:

    I added you on Twitter. Are you on http://www.stocktwits.com/ yet?

  3. Corey Rosenbloom Says:

    Jason,

    Thank you for the link – I love the way you’re combining relative strength analysis (vs Gold and vs SP500) which I need to be doing more. I think a lot can be gained from RS analysis.

    I missed the buy signal on the standard MACD – good call.

    Are you saying the $38 level is unlikely to hold? We’re down 10% today which is a pretty bad rout.

    It could eliminate the bullish hammer on the monthly chart.

    I just started up at your suggestion with StockTwits. I’m still new at Twitter so I appreciate all suggestions/ideas/ways to improve.

  4. Jason Says:

    What I meant was that on the shorter term time frame there was a descending triangle, which price actually broke out of to the upside. We’ll see if that breakout holds or not. If Crude went back down to test $38 and held then I would be more confident about the longer term chart.

  5. Corey Rosenbloom Says:

    Ahh ok.

    Today’s shaking up a lot of the charts for sure. Crude, Stocks, Gold Falling. Dollar Rallying. Can’t wait to do analysis after the close on the fall-out!