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Has the Oil rally peaked?

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Hi M
Sorry for short information, in my view I see oil starting to fade away from the 40 handle, we could test again over the coming week but then a drop to 3250 will probably be on the cards again

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Ah!  No worries, thanks for the clarification.  I tend to agree, although price could easily rattle down from here.  In light of the Stock market rally strength I have been re-looking at everything, here is my renewed take on Oil:

 

As you can see from my Weekly chart, price has rebounded strongly from a dual set of tramlines (one being a Triangle top, which is shaping up as a so-called "ending triangle").  This resistance also comes at a 38% Fib from the W4 (purple label) high (see daily chart).  There is building Pos Mom Div but I don't think it is completed yet because we are overbought on Stochastic and have turned back (also on RSI).  Therefore it looks set for a drop and my analysis initially targets the $20 region (with $10 being a possibility for the final turn - depending on how the movements play out).

 

Looking at the Daily chart, we can see the 38% Fib and in addition to the 2 weekly chart tramlines also a nice Daily chart pair of tramlines (red) containing the entire move down from 6 May 2015 (with a nice prior pivot on the upper line).  There is Neg Mom Div and Stochastic/RSI have hit over bought and rebounded back down.  Ideally you would expect to see RSI dip into the oversold band before any really of significance, although a short term pop up cannot be excluded just yet.  There are 2 leading turn options that would signify different overall patterns but let's wait and see on that.

 

On the Hourly chart we have seen the turn, neckline kiss and rebound and have dropped below the 15 Mar low.  Now I think we either get a small retrace rally to set up a strong wave 3 down OR a quick drop through the lower tramline (brown) to set us on the way down a W3 that has already started.  Give a set of so-called "nested" 1-2s this Wave 3 is likely to be strong.

 

Options to play a Short (no sign of a Long here in my view, not until we reach one of the major turning points on Daily chart):

  1. Wait for a pull back to a suitable Fib or tramline AND/OR,
  2. Set a stop in just below the lower Tram to catch any quick move down.

Here are the charts, look forward to thoughts and critique:



 

 

 

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Brent Crude has had a not unexpected rally overnight but could be about to turn south again.  There is some short term support/resistance (red line on chart below) at the W4 turn on the previous move (a classic point of resistance in EW theory).  Additionally I have a down-sloping tram and a Fib 50% off the 31 Mar turn (the wave 3 start point) and Stochastic/RSI are in overbought territory.  I'm targeting somewhere between 3900-3950 (most likely the Fib 50% at 3910) for a Short opportunity.  Note this is a W3-4, and they can be temperamental plus W5 might not be that long so an alternative strategy is to wait for the whole move to complete and assess whether the subsequent rally will make new highs or is just a relief rally preparatory to a big move down.

 

Chart:



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Brent turned right at the leading edge of the resistance zone and right on my tramline, all slightly before the Fib.  Given the strength of this hours move (and if it closes the hour like this) then I would be declaring another turn down.  I did go short at my tramline.

 

BTW, Shell A has turned at the 62% fib and is breaking below a neckline.

 

Chart:



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Went short at 37 earlier. Very cautious on this trade. Playing it by the hour

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Sorry went short 38 us crude early this morning, looking like it's going to hit my  stop. Looks like we have hit a short term bottom last night.

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We had stock reduction numbers from EIA, which has given the market a lift but I am not convinced this is sustainable.  Oil is spiky, as I've said so Fib 62% could still offer resistance, we are approaching that on Brent now (3950).

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With the eia numbers and traders thinking about oil nation meeting on the 17th (what in my view nothing will materialise) I wouldn't be surprised if we tested 41 again before a turn lower

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It looks like the OPEC hopes have further to run, but WTI needs to get moving above $38 I think to have a real chance of moving on up...

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Oil is bothering me!  Although it is moving as I had forecast (one of my scenarios at least) I don't know whether this is a EW1-2 retrace (which may return to the daily tramline (4100 ish) or a W4 turn to take us up to wave 5/C highs.  What really bothers me is having forecast the turn area (38% Fib) I failed to notice the Pos Mom Div on he hourly chart which gave a warning of the turn and got caught out.  For now I'll stand aside and watch how this one develops.  A turn at the 62% fib could just be a retrace of this wave and a strong W1 of W5 (if that is what this is) could lead to an equally strong retrace to W2 before it takes off...

 

Here are the charts:



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Yes, equally perplexed , can't really grasp why the sentiment has driven the price up so strongly - guess I shouldn't try and just accept the trend is somehow my friend (albeit my May and Jun Puts are way out of the money now but hey - what goes up , can go down!)

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Yeah I long ago stopped trying to understand and just go with what the analysis is telling me.  A back story narrative is good to have but not essential to trade in my view. Anyway, as always when I' unclear on things I look for alternative view points and have come up with one ray of light.  Looking at the 2 hour chart (similar on 4 hour if you prefer that) there is a clear downward trend in play and we have had a turn this morning at the upper trend ling with mild negative momentum divergence and overbought Stochastic and RSI.

 



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Apologies in advance, this is a bit of a long one.  Grab a coffee before you start...

 

Looking for some help on Oil.  As I mentioned in my reply to Chris I have a feeling that Oil and FTSE may part ways soon, and maybe that is already beginning?  Stock markets certainly seem to be taking their own course now, if indeed they ever were following Oil...

 

I have two separate but equally valid EW set ups for the movement on Brent Crude and 3 possible scenarios for where we go from here.

 

First the scenarios then the set ups that support them:

  1. 20 Jan bottom was the final bottom of the market and the price starts a rally from here.  The EW count is 1-3 and we have just completed the W4 so a strong W5 is due
  2. The 18 march turn was just a Wave A of a larger A-B-C correction.  We've had the B (completed on the 5 Apr) and are now in a Wave C, which could make it all the way to circa $55.  This would look similar to scenario 1 but end differently and we won't know until after it ends so for now they are essentially the same thing
  3. the 18 March turn was the end of the rally and everything that follows is a final wave 5 down to the bottom but this could come in 2 separate ways
    1. this mornings turn was the Wave 2 and we drop hard from here in a wave 3 (1-5 pattern)
    2. this mornings turn was just a Wave A, then Wave B turn later today and now we go up in a 1-5 to Wave C, which turns before the 18 Mar high to begin W5 to the bottom

 

On the hourly chart I have 2 EW labeling versions on the move down.  The Green labels describe an A-B-C to W4 and the Red a 1-5 to W1 and likely A-B-C to W2 and then a turn down.  The fact that the turn on 5 April was only at Fib 38% (Daily chart) suggests W1 or 4 is more likely than Wb.  There is strong Neg Mom Div on the 18 Mar turn and no Pos Mom Div on the possible bottom of the market on 20 Jan so I am minded to place scenario 1 as the lowest likelihood.  The fact that we have had a strong W3-4 on the whole move down already (see weekly chart) and the price action is forming a so-called ending triangle down to W5 suggests the price should be contained within the daily tramlines (red) (usually it is only a bigger time frame W4 that kicks out beyond a major tram (that or a change in trend of course...).  Therefore I place scenario 3 as the most likely and at present favour options 2.

 

Looking at the hourly chart we did not get a Neg Mom Div at today's high (the classic case is to have one between Wa and Wc tops) so that doesn't support a W3 down from here (doesn't negate it either alas).  Also the move up doesn't follow a nice A-B-C, more like a 1-5 consistent with a Wa.  Stochastic and RSI made a full trip down and pulled back up out of over sold at today's bottom, this is common with a Wb.  The proof of the pudding will come when the price gets back up the the brown tramline.  Will it break it or bounce off.  A Wc should be in a 1-5 with 1-2 occurring quite quickly.

 

Get out your crystal **** to make sense of this one.  As i said before, until the uncertainty crystallises into something clearer I'm staying out.  Plenty to go after in FX and Stock indices right now BUT, when it does become clear it could be a big one so will stay watching closely.

 

Charts:

 



 

 

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Scenario 3.2 off the table with a new higher high over yesterday's.  Glad I cashed all my Oil shorts...

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Strong rally today is in a 1-5 wave form (you have to look at the 15mins chart to see it more clearly).  I'm seeing the 4160 mark as the high point and if we do get a turn here a place to Short for scenario 3 as per previous post.  If this happens it could also spell a turning point for the FTSE100.

 

Anyone out there gut any thoughts on this one?

 

Chart:



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Spiky Oil went a bit further than I thought but did bounce back off the resistance zone.  However that move pushed momentum up so I don't have a Neg Mom Div on the hourly.  Thus i am expecting a drop and another leg up and if this gives divergence then I will be more confident of a turn in this congestion zone.

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We have an interesting few days ahead as I see it - firstly given the Fed will make an unexpected statement today it will be interesting to see how the $ reacts to any rate suggestions and potential economic outlooks - which in turn will impact Oil. Then we have the OPEC meeting next weekend - I am sure positions will be taken on the run up to cob on Friday and anticipate a north movement.

 

Next weekend depends a lot on what happens with Irans production - will they or wont they join a reduction in output ? Personally I think not, which reduces the chances of an overall deal on output. 

 

All in all a real melting pot of opportunity.

 

Oh, and well done the Brits at the Masters - 6 out of the top 10 and a win for Yorkshire ! 

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Quick update on my Brent Crude analysis.  Big picture scenarios are the same but I have a refined near term picture that would mean the relief rally I believe we have been in hasn't quite topped out but is near.  This is a slight alternation of my favoured scenario.  If you look at the chart below you will see that the A-B-C hasn't yet completed and if this is right then it should complete early this week in or around the congestion area (between 4280 - 4360).  I favour a hit on the Daily chart Fib 38% (redrawn vs previous charts) at circa 4345.

 

Therefore, if this scenario is right, we should get an initial drop back down to make a W3-4 of Wave C and then a final 1-5 wave push up to 4345.  This also correlated with my view on FTSE100.

 

Anyone got anything different?

 

Chart:



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Here are my thoughts on oil as of 11 am UK time today.

 

We appear to have broken out of the downward trend given that we have an upward 50/100 cross for the first time since mid July 2015 plus the downward trend line has been broken and an upward trend appears to be forming well.

 

Depending on where you like to draw your fibs from we have cleared the longterm 38.2 and short term( 50%) from mid october and are now in the area of the short term 61.8%. This gives rise to an area of strong resistance given the support on the way down in Nov and Dec 15 - which is where we are now.

 

I appreciate this is very simplistic - but thats my approach.

 

So, imho,  my short term immediate outlook is a potential retrace  to test 3800 ( supported by the bottom up trendline and/or then a move upwards to test 4360/4440 area before higher moves if markets worldwide improve and production supply is reduced or demand returns.

 

Would be interested in your comments.

 



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Rocketman,

 

You scenario is certainly plausible and matches one of my scenarios.  It is a little difficult to exactly match as I prefer Brent to WTI but broadly they are the same thing.

 

Let me go back to Weekly charts to show my Bull and Bear scenarios (see below).  I can find a case for both and if it is a Bull I think we are in a retrace rather than a push up off the bottom.  I conclude this chiefly because I can't find a good 1-5 wave count down from May 2015 high and we didn't get a positive Momentum Divergence with price on the Daily chart at the Jan 2016 low but everything else fits.  

 

However my nearer term horizons (Daily and hourly) both point to a near term top (Fib levels, tram lines, congestion zone, EW counts).  In addition there is a Negative Momentum Divergence building on the Daily & Hourly with additional Stochastic and RSI in overbought territory.  We had a very strong Stochastic bounce between oversold and over bought on the Daily, which some may view as bullish but I see as offering up the likelihood of a reaction back down.

 

If the market turns at my congestion zone (Red horizontal lines) then I will have more confidence in the bearish scenario but not yet 100%, for that we need lower lows and lower highs there after.

 

Here is how I plan to play it.  If and when I see turn in my congestion zone, with the right EW count, I will go Short and if the market moves away down I will move my stop to just above the high.  If it goes above that then the Bull is on, if not then the Bear.  We ought to know soon...  As I write the market has made a new high above this mornings (1am) high.  That means the W3-4 is done and we should now get a 1-5 up to the congestion zone.

 

Charts:



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Appreciate that, thanks Rocketman.  Please keep posting yours too, always great to get different views and types of analysis.

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Brent Crude has hit my target Fib line and I have taken a Short.  it is always a bit more risky to take a short on the rise rather than waiting for a confirmed turn but I feel like the set up is good and my stop is tight.  If Oil does turn here then the stock indices could continue on down (i.e. the turn at Wc was last night).

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ditto ! I had my entry point at 4360 and it touched into it so my short is in play too - if that was the turn then great.  Have a protective stop in place in case of bull run.

I'm looking at 4150 as my target area - what about you?

(brent crude)

 

C

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oh and the hourly had negative momentum so that gave me some confidence it's the right time.....we'll see.  C

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I agree: congestion zone and Fib line; Daily tram resistance; overbought Stochastic and RSI on both Daily and Hourly; Neg Mom Div on both too, it is a decent bet.

 

As to targets. it depends whether this turns out to be a Wc end to W5 down or W3 to W4.  Wont know for a while, if it turns of course...  I have 2 positions so am set for a dual bet strategy, although I'm likely to seek additions on the way down.

 

For now I'm assuming Wc as my lead scenario (thus would protect against W3-4 but plan for W5 down).

 

A W3-4 target should go at least to the 38% Fib, from the 20 Jan low (daily chart) and previous low (5 Apr) that would be in or around 3740.  If it is a W5, well...  I dunno, 2000?  :smileylol:

 

Let's see if it does turn and then revisit as we go.

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Yes Dual Bet Strategy (Burford calls Split Bet Strategy - just reading him at the moment) - like that a lot - have only 1 position running but will add a second when i figure out where to add a second short. C

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Suggest:

 

  1. Wait for turn to be confirmed
  2. Wait for W1-2 retrace and turn for second position 

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Interesting, do you still think the short is valid ? I was waiting for a clear of the 100ema on 5 mins before joining - and so far we have failed to hit and retraced. I suspect another test of the high is required.

 

Also - are any of you guys UK based ?

 

 

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