Weekly and Daily Look at Crude Oil May 28

May 28, 2009: 10:17 PM CST

A few readers have asked me to take a look at crude oil, so let’s look at the larger weekly structure and then see what insights we get from the daily chart.

Starting with the weekly structure:

I have called the entire move down from the June 2008 highs as “Wave A” down and currently have us in a potential corrective Wave B up.

Alternatively (perhaps more plausible),  the entire correction has taken place and we have seen the lows in Crude (which will be particularly true if we enter a period of inflation going forward) so keep open to both possibilities for the time being.

We had a massive correction off the 2008 highs as global economies fell into recession and the demand for crude oil lessened.  We came into critical support about the $35 per barrel level before price has almost doubled off these levels – a position many thought impossible at the time.

For now, we’ve come into a critical zone in testing the flat 50 week EMA at $66.30.  If bulls can break this level (I highlighted it), then we have the 200 week SMA at $74.70 and then the 38.2% Fibonacci retracement comes in at roughly $79.00.  These are key areas to watch on the upside.

Now let’s drill down to the daily chart for lower timeframe insights:

I remember taking heat from people when I was pointing out the bullish “rounded reversal” and multiple swing positive divergences back in early February.  I took a “Long-Term View of Crude Oil” in early March as well which is still of interest today.  I first mentioned the possibility on January 20th’s “Rounded Reversal in USO and Crude Oil” post.

We have seen the reversal upwards I felt the charts were blatantly showing (despite the negative economic conditions and recession).

From an educational standpoint, we had the “Cradle Trade” occur in mid-March and then a strange, flat/corrective Bull Flag form and complete its target in May.  I repeatedly mentioned the $70 price area as confluence resistance (from multi-timeframe moving averages and lower-level Fibonacci retracements) and we’re just about there.

Once we reach $70 (if we do reach $70), the picture as I see it becomes far less clear.  I would suggest crude bulls have a great deal of resistance to overcome so that area will become a key technical decision node to watch.

As such, let’s continue to watch the structure develop and learn the lessons from the chart that we can – honestly this was one of the strongest and most persistent positive momentum divergences on a major market that I’ve seen in a while – it would do us well to learn the message from this pattern.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “Weekly and Daily Look at Crude Oil May 28”

  1. Dutch Says:

    The smartest thing I've read about oil since last year was all the infrastructure projects the Saudi's initiated priced and based on $75 oil. Anything above or below that mean hurts their interests. Too low and the revenue stream is short. Too high and the operations costs are too extreme.

  2. tdtrader Says:

    hi corey, when you have a sec. can you look at the ag group.. specifically POT. I'd love to get your take on EW counts.. Great info as always.. thank you.

  3. BG Says:

    Hey Corey,

    Great analysis you have done so far on the US indices especially on the EW front. I have been trying to do a Double Bottom on the Indian National Index. and diveragence anaylsis on SUZLON. It has definitely performed much differently than the S&P .Do you think you could look at the NSE and SUZLON and provide me with you valueable feedback on this. Thanks!

    Link to blog : http://tradingstocksontechnicals.blogspot.com/

  4. Corey Rosenbloom, CMT Says:

    I read a similar article – I think about $70 was the target. It's so amazing – all sorts of technical analysis confluence comes in at that area on multiple timeframes.

    Odds are we're being pulled there like a magnet from both technical and fundamental sources.

  5. Corey Rosenbloom, CMT Says:

    I read a similar article – I think about $70 was the target. It's so amazing – all sorts of technical analysis confluence comes in at that area on multiple timeframes.

    Odds are we're being pulled there like a magnet from both technical and fundamental sources.