Brent Crude is following my roadmap

[Mercury]

A while ago I posted that I would wait for a significant retrace before considering a Short on Oil as I had missed the to of the previous rally.  I am not a regular trader of Oil so only go into it when I see major turns and perfect set ups.  I did go Long recently when Oil finally broke out of the bearish Channel into the current rally but exited a week or so ago as I saw significant trend change signals (inc strong resistance zone, gaps closed, 1-5 EWT count, NMD on Daily and hourly charts).  On the Hourly chart  a strong retrace was repulsed a the Fib 76/78% level followed by a sharp bullish move.  I am watching for a new lower low followed by another retrace before a stronger bearish move, although the retrace may not be that strong.  I have taken a Short off the Wave B turn. 

My road map remains unchanged.  I believe the current turn is a Wave A that will lead to a B-C to come to complete the full EWT 1-2 retrace.  After that we should see a longer term bearish move as Oil gets swept up in a general economic malaise, the evidence for which we see daily with continuing Retail hits, the latest int he UK being high street stalwart LK Bennett.

[Mercury]

Brent has gone into a bit of a relief rally today, which alters my short term EWT labeling a bit but doesn't change the bigger picture for me.  Looks like a potential EWT 1-2 retrace, now completed at Fib 50% within a small flag.  Not conclusive yet of course, this is an early look, so I'll be looking for a break below recent lows and ultimately a break of the lower medium term support levels around 6350 as the market heads towards that un-closed gap.  For now I retain my assessment that this is a wave B before a further rally to complete the larger time frame retrace.  I wonder if Stock indices will follow suit...  🤔

 

[Mercury]

Not actually a Flag looks like and the retrace went to the Fib 62% rather than stopping at the 50% but otherwise looks like a Bearish phase in the offing.

[Mercury]

Set up on Brent has morphed into a small coiling triangle formation.  Break of this should determine medium term direction.  I remain Bearish for now but will be looking for a break of that Triangle and lower support zone for confirmation.  It looks like Oil and Stocks are broadly aligned for now.  I anticipate this continuing in general for some time.

 

[Mercury]

Not a coiling triangle on the hourly chart but a channel consolidation peaking at near the short term Fib 88% off the wave B or 2 top (don't know which yet), plus the Fib 76% off the Wave A top (see Daily chart for that one).  Confluence of 2 different sets of Fibs is often a strong support/resistance zone in my experience.  Solid breakout of the lower consolidation trend-line confirms the set up for me.  Now looking for a break of the 6450 support zone and then an onward break of the next key support zone to cement the trend change.

Looking at the Daily chart, the recent rally looks very much like an initial wave A (blue), unless the long term set up is on a very Bullish footing suggesting this is all a large scale A-B-C retrace), which doesn't seem likely at this point.  If this proves to be a Wave A then I anticipate a Wave B-C down and then up towards the previous long term rally channel breakout zone, prior to a sustained Bearish market to the bottom (currently targeting the 1998 lows - see previous post Weekly Chart).  This is coinciding with my set ups on FX, precious metals and Stocks and with Bonds seemingly Bullish the overall correlated scenario seems strong.  All subject to how the price action plays out through Spring into early Summer but we should see resolution to all this soon enough I think.

Note also the existence of a Death Cross on the Daily chart.  I have observed over time that you often see an initial Death Cross that is reversed and then triggers again after the EWT1-2 retrace is completed.  I think this could be happening on Oil and FX, and has already happened on the Dow, which would be consistent with the death of a very strong Bull market for me.

Trading strategy:

1. I am holding tactical Shorts, short term and stop protected at break even (I do this to keep my account ticking over to pay for holding long term positions)
2. I may seek to reverse and go Long at the Wave B zone on price action and other signals if I am not fully engaged elsewhere (Stock indices shorts are better value and lower risk just now in my book and I am heavily Short Stocks)
3. I am chiefly focused on getting Short at the full retrace completion for the longer drop but subordinate to stock indices Shorts ("The Big One").  If these markets do all turn around the same time then stock indices are the more lucrative bet for me.  That said some diversification can be helpful.

[Mercury]

First support broken.  Next up is he 6350 support zone.  Note, if this is a wave B then it will either hammer down in a straight and fast 1-5 wave run or whiplash all over the place so caution is indicated.

 

[Mercury]

This is one of the reasons I dislike trading Oil and do it rarely.  What looked like a great set up with a strong move in the indicated direction was quickly reversed.  The Bearish set up is not extinguished by this move but it does call into question whether a fresh high to the overhead Fib 50% is on the cards prior to the retrace I am seeking.

For no I remain cautiously Bearish as all the indicators still support this and despite the Daily bullish in bar (which notably still produced a red bar) the Weekly chart overall remains Bearish to me.

 

 

[Mercury]

So another leg up then, and now another 50/50, will Brent carry to the Fib 50% or turn back down with a lower low?  There is a strong case for the Wave A completion having already occurred with good levels of Neg Mom Div on both Daily and 4 Hourly charts and other oscillators having turned back from over bought levels.  A break of the rising narrowing channel is something to look out for but I currently still believe we will see another rally after any bearishness before the long drop continues.

 

[Mercury]

My alt scenario (red arrows in previous post) has played out with a turn on the Fib 50% and sharp Bearish drop away.  I am Short off the Fib 50% turn and stop protected just above the high.  There is strong Neg Mom Div at this high and turn but I would like to see a breakout of the narrowing channel lower line and the next support zone for the set up to follow my road map.  Currently I believe this is a wave A that would drop to a suitable support zone to conclude wave B before a rally to a new higher high at Pink 2, the Monthly Fib 38% & Daily Fib 62% (or maybe the Weekly chart Triangle breakout zone just above).  This set up is another reason why I have a complex retrace scenario as my favourite for stocks (see separate stocks thread, "are we there yet").

 

 

[Mercury]

I was expecting an EWT1-2 retrace and not surprised by the strength of the rally, especially on Oil.  However the 4hour chart pin bar rejection on NMD suggests to me that this is a retrace and not a motive wave so my road map remains intact unless we see a higher high int he coming days.  I might expect a small retrace against the pin bar but if this fails with a lower high then cue significant bearish move.  A break of the narrowing channel will seal it for me but there are better opportunities around if Stock resume a bear move and EURUSD decides on a rally.  That said if Oil is a first mover I might get in with a small Short if I see the reversal confirmation I am seeking.

 

[Mercury]

Possible Wave A top!

Price has hit the upper line of my narrowing channel a second time and bounced back hard (not yet closed on the 1 hour).  All my technical indicators remain Bearish.  A lower low on the hourly will be indicative and a break of the Daily channel lower line will be a strong signal for a BEarish phase.

 

Will stocks follow?

[Mercury]

The bounce back off my upper channel line continues after a pause over night.  That is a technical small EWT1-2 which could suggest a strong move down now through the near term support zone.  Of course it is equally possible we see a further retrace before such a move down so the key for me is whether we get a strong break through the support zone and the lower channel line.  I am Short off the potential Wave A rebound.

 

[Mercury]

The short term support was not breached and the market continued to grind up.  Looks like a strong channel has emerged, the breakout of which would herald a long Bearish phase but before that some I am looking to see a turn back from a significant resistance zone; maybe the Monthly 38% fib (underside) or the previous bullish phase channel breakout zone.  Given the placement of the Flag I am favouring the latter resistance area but we may well see an EWT3-4 retrace with the channel and another test of the lower line before we see that high.  NMD is building with each new mini high and there is strong NMD on the hourly charts as well.  Oil is, as present, following a similar path to Stocks.  A Summer top out is on the cards, given the wave profiles on both. 

 

[Mercury]

Brent Crude is still targeting the 7,500 mark but if this is to be the termination of the retrace rally then we can expect a few whiplash twists in the late stages.  The 7,500 area is the breakout zone from the previous Bearish phase and an area of strong resistance in my opinion.  We have already seen a Death Cross, which is just now on the verge of being reversed.  It is quite common for an initial death cross to be reversed only to be triggered a second time, which is the true Death Cross.  This is consistent with an EWT 1-2 retrace prior to a large wave 3 in the motive direction.  In this case, if we see it, this would indicate a long Bearish phase to come.

Before all that though we should see those twists.  On my 1 hour chart I see 1 or 2 possible bearish moves that will result in higher bullish moves to bring us up to the potential turning point.  This may also correspond to a similar picture for Stock indices.  I think we will see Oil and Copper lead stocks down and all will then drop for a significant period while safety markets (USD and Precious metals) will rally.  Even if you are not trading Oil and Copper it is worth watching them for indicators of a reversal.

[Mercury]

Brent is really behaving very nicely WRT my road map.  Looks like the wave 3 top I was tracking has occurred and the break through the short term supporting trend line is setting up for an A-B-C retrace to wave 4, which should hit around about the lower Daily channel line to spark a final wave 5 rally to the end of the Bullish retrace.  However a significant breakout of this channel could spell the end of the rally and the beginning of the major bearish phase I have been tracking. 

For now I am holding Shorts and waiting to see if that lower line will hold or not.  If not then hold long term if it does hold then cash and reverse.

[Mercury]

Still following.  Maybe we will see a bit of a relief rally early next week but at present I am waiting for a completion of a short term retrace down to the lower Daily channel line before a final rally up to top out the current rally.  I have already taken profits at the A (brown) point, wont swing up until the lower channel line is hit.

[Mercury]

Brent still going according to technical set ups but a pivotal point is coming up, the Daily chart supporting trend-line off the late 2018 turn and rally.  A breakout of this would indicate a trend change and herald a Bear market, which could run for some time to complete the full journey from peak of Oil to bottom of the market...  However my technical set up suggest another leg up is the more likely scenario this time so I will be watching for a bounce once the A-B-C retrace is completed.

Technical picture:

• The wave 4 (Weekly chart) turn in early Oct 18, very near the long term Fib 50%, signaled the end of the long retrace off the all time highs back in July 2008.  Fib 50% and Fib 62% are the most common retrace levels.
• We had a very strong bearish run to end 2018 that was getting the trend followers very excited but EWT analysts were waiting for the 1-2 wave retrace, which we got.  Note these timings are in sync with stocks.
• That Bearish run was a classic 1-5 wave form, ending with a Positive Momentum Divergence (PMD) and a narrowing channel breakout AND (importantly) a gap that has not been closed.
• The rally since the breakout has been contained in a parallel line channel.  It has lasted longer and been weaker than the preceding bearish move off the Oct 18 high.  It is following an A-B-C pattern, albeit that the wave B was very shallow, which could pose a problem for the analysis, but only a different retrace pattern and not a Bull scenario.
• The rally within the channel shows a Flag formation around Feb/Mar, which in chartist lore occurs at the halfway point of the wave (indicative of course).  This would suggests the market is in the right territory for a turn.
• On the Weekly chart the current weak shows a pin bar spike through the Fib 38% BUT this week is not yet over so this is not conclusive, yet.
• The EWT count suggests the turn at the top of the channel this week could be a wave 3 but Daily chart  Negative Momentum Divergence (NMD) has been building steadily along the retrace as it tends to do.
• Daily Stochastic is over sold but RSI isn't, this is what I would expect to see for a small retrace leading to another leg up.
• Ont he hourly chart we can see the wave 3 top (or end of rally?) and a fast drop through short term channel support in 1-5 form to a likely wave A.  After than a nice failed retest of the breakout zone (A-B-C so could be a 1-2 retrace off a rally ending turn that is setting up for a fast and strong wave 3 breakout through the supporting trend-line).  The market has ground its way down since that failed retest and is now approaching the supporting trend line with PMD building.  A lower low and failed test of the supporting trendline will indicate a rally to come.  A failure of the support line to hold will indicate the larger time frame retrace is indeed over. 

 

I have 3 scenarios:

1. Support trend line failure leading to long term bearish phase
2. Failed retest leading to retest and rally end at the previous bearish breakout resistance zone
3. Same as above but rally carries to the Fib 76-78% resistance zone, or a bit higher

I have no technical scenario supporting a long term rally in Oil, at least not at this juncture.

There are 2 likely end of rally zone:

1. 7550 where the resistance zone of the previous channel breakout occurred
2. 7850 at the Fib 76/78% resistance zone, however this resistance zone carries all the way to 8000 so we could see a spike to there first.

But first we need to see which way the market goes when it hits the supporting trend-line.  I think the rally and end zone will roughly correlate to Stocks topping out on their respective rallies.  Watch High Grade copper for end of rally signals too.  Either way this ought to be resolved fairly soon.

[Mercury]

Brent is still behaving well according to my road map.  The market looks to have completed its retrace, which still seems like a EWT 3-4 to me and has bounced off the long term supporting trend-line with 1 hour PMD.  A small 1-2 is posted but this will not be conclusive for me until I have seen a break of the upper resistance zone that has failed recently so while I am Long off the second bounce I am keeping stops tight.  I don't expect this market to rally hard as this seems like a final wave 5 prior to a major Bearish phase, which is my key focus.

[Mercury]

A sharp end of day drop on Brent brings up a question as to whether or not the 25 April top was a rally ending one.  A sustained break through the supporting trend-line will suggest it is but the price action could stand an other leg down to complete an A-B-C retrace too so early trading next week could see a drop off before a final wave 5 really that is mirrored in Stocks.

Either way the long term outlook is Bearish, very!  All scenarios I have point to a resumption of the bearish trend Oct-Dec 2018 and of that happens then can stocks be far behind?

 

[Mercury]

Another leg down then and a need to re-position my lower daily chart channel line.  The market has bounced off the underside of the Fib 50% at Support zone and the price gap was highly suggestive of a rally at least to close ths gap, which is what happened.  Then the market traced out a series of rally retraces (EWT1-2s) in consolidation (higher highs, higher lows - not conclusive but indicative) and is now poised to take off on that final wave 5 rally to conclude the overall rally since Christmas.  I am seeing something similar in stocks, albeit more dramatic.  Can't rule out a drop through the support zone of course so care in the form of close stops is needed but I am long off the Fib 50% turn and well stop protected so in good shape to profit from any rally or stop out for minimal loss on any reversal so all good.  Several zones of resistance on the 1 hour chart to get through but when Oil moves in a motive wave it tends to blow short term support/resistance away so the main area is the 7,500.  A break of this confirm a wave 5 up, after which it is all about spotting the turn off the top of the rally for a long Bear campaign.

[Mercury]

Brent has made the turn and is now approaching a short term resistance level retest around the 7275 area.  A break here will bring up a retest if the prior high around 7500.  If this fails then 8000 is looking to be the next major resistance zone.

 

[Mercury]

Ah so much promise and then boom!  falls back to earth.  Enough to make you throw in the towel but wait, a bounce right off the supporting trend line, a small 1-2 an then rally again.  Maybe this time?  Stocks are rallying too.  One last leg up before oblivious beckons...

[Guest PandaFace]

Bit of geopolitical instabaility and **** hitting the fan from Iran would help

[WallStFoxy]

1 hour ago, Mercury said:

Ah so much promise and then boom!  falls back to earth.  Enough to make you throw in the towel but wait, a bounce right off the supporting trend line, a small 1-2 an then rally again.  Maybe this time?  Stocks are rallying too.  One last leg up before oblivious beckons...

@Mercury

If there's no rally tonight I suspect there's real fear in the markets and this bear market will be in for the summer. both oil and equities are at serious support levels  and a further sell off from here would be very bearish.

[dmedin]

17 hours ago, PandaFace said:

Bit of geopolitical instabaility and **** hitting the fan from Iran would help

Yes - we can make a neat profit from more death and misery in the Middle East.

[dmedin]

16 hours ago, Foxy said:

@Mercury

If there's no rally tonight I suspect there's real fear in the markets and this bear market will be in for the summer. both oil and equities are at serious support levels  and a further sell off from here would be very bearish.

 

You call this a bear market?  How so?

[dmedin]

I'm sorry I think I misunderstood you, but can't remove my post or edit it

[Mercury]

@Foxy I agree with you that the big picture (daily charts) shows a significant support level for both stocks, although just now Oil is more around the recent lows and lower channel line (6865 area - Brent that is).  For stocks, again it is a bit lower, maybe circa 25,000 for the Dow, so both could take a short term tumble but still be in overall up trend.

On Brent right now price has been stopped at the previous breakout resistance zone and sent back down short term.  Will need to see this zone broken to the upside to maintain the short term final wave scenario.  A breakout of the channel line below that 6865 would suggest the previous high has ended the rally.

[Mercury]

Brent Crude has take a fairly significant retrace.  Is this a prep for a rally?  Certainly looks like it to me.  The retrace can be described in a Triangle (maybe a pennant) and A-B-C to a drop and spike back up out of short term support (if you zoom out on your chart tool you will see the strength of the support).  PMD at the spike point supports a rally.  A break of the Triangle will be helpful but I would anticipate a short term bearish retrace prior to the rally really getting underway.  This could happen within the Triangle or as a breakout and retest.  Perhaps a period of USD weakness could lend some short term support to an Oil rally too.  With Oil and stock indices tracking each other at present this also bodes well for the socks rally I am tracking (see posts elsewhere).  If we get Oil rally and USD bearish move the USDCAD is set for a decent drop (will post on this shortly).

 

[Mercury]

Brent Crude is no longer following my road map.  Time for a new road map.

Thread ends