Weekly and Daily Look at Crude Oil May 28
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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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.
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.
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/
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.
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.