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Brent Crude rally ends, time for the big Bear!


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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

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Not seeking to trade Brent at present, the entry has been very difficult to spot with a lot of whipsaw action where as Gold/Silver and FX is much cleaner right now.  However I do feel that Brent is into a rally phase in ling with my medium term retrace scenario to the $80-85 level, which may be part of a broad commodity reflation action as some commentators have been calling.

In addition to all of the technicals I have posted on in this thread that supports such a view we now have the addition of a Golden Cross on the daily chart.  Note also this comes after a prior Golden cross and reversal, which is quite common during a consolidation phase.  It is the second cross that usually produced the rally.  Short term we will probably get some bearish moves but these should provide buy the dips opportunities for me.

Brent-Daily_281219.thumb.png.66bea967e144c9be80ad0c5844e13e00.png

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  • 2 weeks later...

Look, I saw there was a 'window' and put in an order to buy at around 50% retracement.  The theory being, that if the window was closed and the price rebounded, it would be a fine spot to get in.  But if the price pushes through the closed window then it will probably fall further.

261893468_Oil-BrentCrude_20200108_09_48.thumb.png.942c08ced953b5f06111c2a0d3444711.png

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1 hour ago, dmedin said:

Look, I saw there was a 'window' and put in an order to buy at around 50% retracement.  The theory being, that if the window was closed and the price rebounded, it would be a fine spot to get in. 

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 a while and see how things develop.  Same thing on stocks, unless you were awake middle of the night and seeking to buy the dips, alas that move is done now and the risk of another reversal is higher as stocks move into a potential phase of ping pong price action ( more on that later perhaps, if I can be bothered...).  Anyway the point being if you are not clear on the bigger picture then the short term is fraught with risk.

With respect to your chart, I don't see the logic of placing the bottom of your Fib where you did.  That does not appear to me to be the beginning of a wave move, rather potentially a wave 4.  If you place your Fib bottom at the early December 2019 low (a likely wave 2 on the whole expected rally) and at the beginning of the rally (my wave B green) then what would you see?

If my analysis and conclusion is correct and this is a wave C to a near double top with the Oct 2018 previous high (it could still blast through this to new highs...) then I would expect a period of consolidation is some form of Flag pattern around about the half way point.  If the top of the wave C comes in around $82-85 (my target range for a counter trend rally) then we are at about the half way point now.

I am, therefore, now looking for a period of consolidation around the monthly chart Fib 38% (could get quite a range around this) and to see a breakout to the upside to begin part 2 of the rally phase.  The daily fib 23% off the wave B (green) low and yesterdays high could provide support for a consolidation range.  If something else happens I will reassess...

Note:  By "window" I assume you are referring to the price Gap?  If so note that gaps are usually filled unless they are breakaways but a retrace and fill does not necessarily trigger a resumption of a rally.  All we can really say is that usually it will be filled and that the rally may resume some time after that (or it could spell a trend reversal) so for me not a trading trigger, especially not after such a sharp rally and reversal and at a point where my long term projection is anticipating a period of consolidation.

Brent-Weekly_080120.thumb.png.0258058640e2375d5627f6418fae5a02.png

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Wasn't going to post this until the weekend but turns across the board may be occurring so it could be relevant now.  Still have the Fib 50% just below at 6350ish so could get a reversal off the current turn but as a general setup that fits with my ongoing analysis, this looks like an A-B-C in keeping with a complex retrace scenario that still has the $82-85 top out target in place.  However before that I think we could see a significant bearish move.

Brent-Daily_100120.thumb.png.e87671b6e62531a4d31f11fd6b68f663.png

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On 14/01/2020 at 17:58, dmedin said:

Long-term expectations about oil prices remain firmly anchored around $65-70 per barrel,

I can't remember a time when Oil remained in such a tight range...  I suggest the Journo who wrote this may not actually know much about markets in general, never mind Oil...

I remain with my LT target around the $85 level on Brent.  Form a purely technical perspective the price action is consistent with a complex retrace such that we should expect a move back toward the $60 level before a strong rally.

Short term price is getting held at the Fib 50% level just now and after such a sharp drop we might anticipate a relief rally to maybe about $68-69 before a resumption of the bear move to $60.  There is strong PMD on the 1H chart at the lower point in the drop.  But it's oil so anything can happen, as we saw with the drone strike...

Brent-1-hour_160120.thumb.png.c611ba51f956ddfd7bd2f961ba41c40e.png

 

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43 minutes ago, dmedin said:

It has indeed bounced off the upward trend, only just though

That's how it starts, especially for a retrace as opposed to a motive move.  After a sharp jump with a gap and then close of the gap with a strong bearish move (1-5) there was a good chance of a relief rally.  Price bounced off the Fib 50% on positive momentum divergence after a credible EWT 1-5 so the chances were high of a relief rally.  2 ways to trade it:

  1. Preemptive early Long after a small 1-2 with a stop just below the previous low for a very low exposure trade and excellent risk reward, which is what I did because wave Bs are tricky so the earlier you are in the better as whipsaw can easily stop you out
  2. Wait for a break of short term resistance, but as I mentioned this leads to greater exposure and leaves you at the mercy of that unpredictable wave B.
  3. There is a third way, which is to wait for the wave B to end and get short.

Soon I will move my stop to BE and sit and wait for the move to play out one way of the other.

LCO-1-hour_160120.thumb.png.07660508d4d37907c8403f82a4150b19.png

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  • 2 weeks later...

The A-B looks like it was very small indeed, if my retrace scenario remains in play.  Price is approaching the Fib 76/78% level I was targeting and the move looks very similar to the bear phase after that drone attache gap rally.  A turn an rally in Oil would be bearish for stocks as well so here's hoping...

Brent-Daily_250120.thumb.png.e9a0fdfc80fe3a5d09c5a56d745c8e6a.png

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15 hours ago, elle said:

potential channel break

Possible but I would need to see a lower low (below $50 on Brent) to take to Shorting at this juncture.  Currently price is halted at the Fib 88%, maybe that's all the Bears get in this move?

Brent-1-hour_270120.thumb.png.45b11cb2404e53b31d2418bf86230172.png

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23 minutes ago, dmedin said:

So you think it's more likely to get to $84 than $56?  Crikey

I presume you mean in this phase?  I actually think it will hit both but it will rally to $85 (or more maybe, a break of the previous high at $86.70 would set up a much more bullish scenario) and then it will drop to Earth and surpass the $50 level.  Long way to go on this yet.

In terms of this phase, if price does drop back down and breaches the $56-55 level then a test of the $50 level is on and a break of that level opens up the market to a massive bear.  This is my long term scenario.  Can it do that in this phase?  Of course, it just isn't my lead scenario.

So net, if we do see a rally from here (the Fib 88% and therefore last chance for a wave B - I don't buy a double bottom in this scenario) then my large A-B-C back to $85 is a possibility.  EIA up today so that is likely to be a make or break for these 2 competing scenarios which are, wait for it, Up or Down.  Who knew...! 

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