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Brent Crude rally ends, time for the big Bear!


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Taking a quick bigger picture look at Brent I see we are at a critical juncture for this market from a technical perspective.  Long term my view is aligned to those market experts to feel the world is now awash with Oil as a result of Fracking, in terms of reserves, and that this moves the power away from OPEC, or at least balances it more evenly.  I also agree that demand will fall over time due to recessionary pressures on industry, population reduction (cos it has to or we are all doomed, something little Greta seems not to get...) and a shift to alternative energy sources (including or because these are cheaper now than oil in terms of production costs).

Short term however there are still fears over more drone strikes and an all out war in the Middle East Deja vu anyone?

In terms of the technical set up, the huge gap up cannot be easily ignored and as such my lead scenario is that this constituted a wave A which was followed by a counter trend wave B to close the gap.  So far this move has turned with a slightly higher low resulting in a double bottom.  If the market reverses now and posts a lower low then Bear it is but so long as it stays above the previous low (B blue on my daily chart) then Bull it is to a higher high for a large scale retrace to a wave 2 (Pink).  After than we ought to see a massive Bear move but that's a ways off.

If I am right about this then the next wave C could be fast and furious, adding to industrial costs as Brent jumps from $60 to $80 in a short space of time.  Just what is needed to fight off a recession! Not!

On my charts I have the following:

  • Double bottom with minor PMD on B (green) turn (with a pin bar) and now regaining the monthly chart parallel channel line
  • Wave B is in an A-B-C, does not support an wave 1 and Gap has now been closed.
  • Narrowing channel (or Triangle) on the 4H chart that has been broken to the upside with a credible A-B-C (brown to make up the wave B (Green).  Strong PMD at the turn. with a pin bar
  • I am waiting for a break of a secondary 1H channel line to the upside.

Brent-Daily_041019.thumb.png.400a5ad00dafb9b34eea5fb3b5f8ecb8.pngBrent-4-hours_041019.thumb.png.e333a0945ec5624af8d2cddb2494df6e.pngBrent-1-hour_041019.thumb.png.f14800571fc5d2847c1a047ba339766a.png 

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I actually closed my oil long on the back of this post (along with some other analysis of course) so thanks for the trigger to re-evaluate. 

First question for you is are you day trading Oil or looking for a longer term move?  If the latter (and probably in either case) then after such a sharp rally and reversal it is best to stay out for

potential channel break

Posted Images

10 minutes ago, Mercury said:

population reduction (cos it has to or we are all doomed, something little Greta seems not to get...)

It happens 'naturally' as societies get richer - people live longer but have fewer kids.

I don't know why you'd pick on her anyway.  She doesn't look like she will be a 'breeder'.

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3 minutes ago, dmedin said:

It happens 'naturally' as societies get richer - people live longer but have fewer kids.

That's what Malthus said but he also said if it doesn't happen gradually and by choice it happens in a cascade (not good!).  Alas our technological abilities may be our biggest issue.  Technology has allowed us to feed, house and warm more people than we should be able to, which has led to environmental consequences.  The environmental issues are a symptom of over population but no one want to talk about that, they just want to talk about bad government and band industry and bad meat eaters causing green house gasses.

6 minutes ago, dmedin said:

I don't know why you'd pick on her anyway.

I wasn't, you always assume the worst.  I was picking on the whole movement to focus on the environmental symptoms rather than the root cause (too many people in a closed system).

 

7 minutes ago, dmedin said:

She doesn't look like she will be a 'breeder'.

Bit mean!  As long as she only has one no problem...

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yes, apparently we'll all start having to eat babies any day now, let's start with Greta.

@AOC is so hellbent on deluding people about an apocalyptic environmental crisis that she doesn’t have the courage to tell a hysterical baby-eating conspiracy theorist to stand down.

 
 
 

One of Ocasio-Cortez's constituents loses her mind over climate change during AOC's townhall, claims we only have a few months left: "We got to start eating babies! We don't have enough time! ... We have to get rid of the babies! ... We need to eat the babies!"

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LOL!  At least the hysteria is alive and well!  Good to know that the human race has evolved so much over the millennia...  Next you know we will be believing in fairies, the healing powers of pixie dust and that this time it is different...

There is a cult that believes we should allow ourselves to go extinct by simply not having babies so that the planet will survive us.  I guess that means we will just eat each other if there are no babies huh?  I am in no doubt that the planet will survive us, the only thing at question is whether or not humans will be around to see it...

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Looking at the big picture there are 2 obvious scenarios as follows:

  1. The April top was a wave 2 retrace completion off the previous bear move, the recent gap rally was a 1-2 and now we are in a wave 3 down.
  2. The April top was a wave A; the August bottom was the wave B and the gap rally was a wave A of a wave C so the wave 2 retrace will end around $80

Both of these scenarios are technically feasible but I prefer the set up for #2 for a variety of reasons.  In any case the likelihood is that if the August low is exceeded on this bearish move down from the top of the gap then scenario 1 is in play but if we get a confirmed turn and rally then it is scenario 2.  The wave B (green) currently in progress would be an effective double bottom and there is strong PMD on both the 4H and 1H charts at this turn.  However there are 2 possible upper channel lines, one of which is broken, so the turn is not yet confirmed for me.  Even if the first line is proved correct I might expect a small bearish retrace before any rally gets going; alternatively a strong rally phase that breaks the upper channel line would be encouraging.  I also want to see USDCAD turn and go bearish but that may not happen until USD in general confirms a bearish turn.  If USD does turn bearish and Oil goes bullish then USDCAD could be an excellent market to trade.

So net I am looking for a return to the 5660 area to complete a small 1-2 before a big rally AND/OR a break above the $59 area to go Long but a break below the August low (5580) would negate a Long trade.

 

Brent-Daily_041019.thumb.png.6468964bdc66c6caa8e4cd4a6f188cf1.pngBrent-4-hours_041019.thumb.png.37ad2bfd2576b0c231331674e0a9ec51.pngBrent-1-hour_041019.thumb.png.98b8fd87796791f95e8f0db1b22d60fb.png

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There are billions of people still living in extreme poverty, I very much doubt that their standard of living can be improved by installing more solar panels and fracking land close to prosperous Western towns.  The demand for oil and coal will actually increase as and when these people get integrated into late-stage capitalism.

If you step back and think deeply about things ... isn't death inevitable?  The inevitable cycle of death and rebirth, never-ending misery.  It is quite enough to drive one insane.

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In this market long for the time being.

Oil prices up as U.S. – China trade talks loom, supply issues mount

  • U.S.-China trade talks to focus minds later in week
  • Brent, WTI benchmarks fell more than 5% last week
  • Supply challenges vex Iraq, Libya and North Sea
  • OPEC Sec Gen says too early to discuss more supply cuts

REUTERS: Oil prices were up on Monday, buoyed by hopes of progress in U.S.-China trade talks and supported by challenges to supply facing major exporters.

Brent crude rose 56 cents or 0.96% to $58.93 a barrel by 1100 GMT, while U.S. West Texas Intermediate (WTI) crude was at $53.44, up 63 cents or 1.19%.

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Oil did break out of the second (alternative) channel line but got stopped by ST resistance and is looking like it will complete a short term 1-2 retrace before the rally gets going.  The break of the Aug low (5580) remains a threat but a break of that short term resistance, whether from here or via another small leg down to retest the channel line, would be bullish for me.

Brent-1-hour_081019.thumb.png.88fb44fc50619d697e697a2ace291989.png

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interesting @Mercury - so you're saying the candle which is a wick, and the bounce, show the move upwards. Not a TA person but interesting to see opinion.

also would google, but don't even know the term to learn about the TA strategy.

Does a closed gap indicate direction too? only thing I got from commodity.com was

"

Windows as they are called in Japanese Candlestick Charting, or Gaps, as they are called in the west, are an important concept in technical analysis. Whenever, there is a gap (current open is not the same as prior closing price), that means that no price and no volume transacted hands between the gap.
"
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There are many forms of TA @cryptotrader, there is even a professional qualification, the CFA, that covers all or most of them.  I use a number of techniques blended into a system of rules and indicators but almost always in the context of a fundamentals/macro backdrop.  I use Elliot Wave Theory to get a big picture cyclical view and to confirm shorter term moves.  I am a swing trader so my method is chiefly about identifying trend changes early and then once the trend is established and confirm I switch to trend following.  Note, support/resistance, which I also use, is a form of TA.

Regarding your specific observations:

  • the candle you mention is less of a factor for me, I tend to only deploy candle price action on the daily+ time frame but it is a form of spinning top or doji candle, which can mean a trend reversal in context (i.e. not always).  There was a decent IG video training session on candle patterns, probably still in the archive if you are interested.
  • The gap is of interest because charting techniques (also a form of TA) hold that most gaps are filled quickly.  The Supply/Demand proponents regard this as unfilled demand so usually the market reverses shorty after a genuine gap fill (i.e. one that is filled quickly).  Gaps that take months to fill are not relevant in this context as they are really so-called breakaway gaps that were not filled during the phase in which they occurred.  The market simply went into a trend change and the fill was a by product of this.

Of more relevance to me was the fact that EWT suggested we ought to get a small counter trend retrace before a larger rally.  Charting suggested that the support zone around the channel line - grey one - and/or breakout zone from the alternative channel line - blue one - would be a strong candidate for a counter trend turning point back into the main trend rally.  Fibonacci retrace suggested the Fib 62% level, where it cut the channel line was a high likelihood turning point, which is where we got that doji candle on the 1H chart.  However now of this is confirmed until we see a higher high, which is where good stop placement and money management comes into any system.

 

So there are a few TA types there including:

  • Elliot Wave Theory
  • Support/Resistance
  • Supply/Demand (which in my book is akin to, or causes support/resistance)
  • Fibonacci retracement
  • and Charting techniques
  • I also use a few oscillators, especially momentum and I especially look for divergence on momentum (where price is higher (or lower) while momentum is the opposite.  This occurred at the previous turn (3 Oct) and is dominant in my method unless or until that low (in this case) is broken or an opposite momentum divergence (a negative one) occurs later.

That is all quite technical I know but hopefully you get the basic idea.  If you google any of the individual elements you will get more info.

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Oil is proving sluggish with some whipsaw price action at present but then it often is just before a fast breakout, which may very well happen over night.  A break of the overhead resistance is key to reducing the chances of another leg down.

Brent-1-hour_101019.thumb.png.9677aecf79a75969a157ea420a54cb8e.png

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Oil looks like it is about to breakout into a bullish phase as per my previous outlined road map.  Chance of reversal is still there but when it does breakout I think it will be fast and strong.  I guess weakening USD can provide additional stimulus as well.  Long term I thin Oil drops below current levels but I am now more sold on this happening via a strong rally phase, possible as high as $80 before a wider financial collapse pulls it back down, along with a decimation of stocks.  As with the USD we are probably looking at the end of the year/Jan 2020 before this plays out, based on current projections.  Bear in mind we could see a stocks "correction" in the meantime but the road maps on stocks are difficult to read at present, as one might expect in an ending phase.

Brent-Daily_111019.thumb.png.bcb9e2354a6a18473d4d0b7ecbcd2487.png

 

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18 minutes ago, dmedin said:

I thought $65 was being too hopeful.

The target is purely technical at this stage.  If the market had completed a retrace back in April 2019 I would have expected the $50 level to be broken and it may yet be as this rally is not yet confirmed for me.  My thesis is that the April turn was a wave A not a C and the move down that ended with the massive gap up was a wave B so a wave C is next, which ordinarily should exceed the April high.  After than I am looking for credible wave C end and turn zones, of which there are several, including $85 and the Long term Fib 50% zone.  I don't need to worry about this now I just need to see if the rally will confirm, keep my stops close and move to break even as soon as practical and let it play out.  Then price action will reveal, hopefully, where the market is heading in due course. 

Brent-Weekly_241019.thumb.png.89f7b90c1057860bcb6e5ebc87bed4e9.png

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Oil has been bugging me of late with its vacillations but this is often the case before a big move.  Yesterday was perhaps a tell though.  I am confident of my take on this move being a large A-B-C with a wave C rally to come, see my previous posts on this.  Some people think oppositely, that the gap on the drone attack was an aberration and the market wants to head south.  But if you look at the Momentum indicator you will clearly see that there was very strong PMD at the turn prior to the drone attack so the way I read it was that the market wanted to go North and that is why the drone attack produced such a huge gap move.  Since then we have seen the gap closed but a turn that is a higher low (my B green) and then we got he vacillation.

However yesterday we saw a sharp rally that concluded an effective A-B-C retrace to the Fib 50% zone (just short).  Now price is testing the overhead resistance zone at 6,200.  A breakout here is likely next week I think and that would be very bullish.  My A-B-C projection have the market exceeding the drone strike high ($71) but also the rally high previous to that ($75) and a retest of the weekly channel line is possible as the rally end, although the Fib 76/78% ($78-79) zone is also a candidate ($82).  This would be a wave C, which would be fast and strong but would probably have a half way Flag consolidation, just about the drone strike rally high I estimate.

Watch out for a gap break of resistance tomorrow but also we could see a short term failed test and bearish move to set up the next push.

Brent-Daily_021119.thumb.png.abe924d81c1f16ebe0e30c5772019013.png

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A little stutter after the initial breakout yesterday but now Oil looks to be backing the first break up with a second break to new highs in the move.  The rally up from the Fib 50% is in a nice 1-5 (motive rather than retrace) and then a small 1-2 retrace was put in to only the Fib 23% before being propelled to that new higher high (very bullish).

Let's see if this one sticks.

Brent-1-hour_051119.thumb.png.3528bf0f263e37b0efdadc939ed48641.png

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