Oil rally primed?

[Mercury]

That Oil rally that I have been tracking gave us a teasing signal last week but no clear breakout and now, with USDCAD rallying post NFP it looks like a retrace down is on the cards but only to set up a stronger rally.  If I am right about USD (see other posts) and USDCAD rally runs out of steam soon then that could all signal Oil will retrace briefly to set up that rally.

 

2 alternatives:

1. Rally to daily down trend line then turn back down
2. Doesn't retrace but just rallies up thru resistance



[Guest Ken]

As they say "Missing fish is always a big one"

 

From July:

 

"I think its started for Crude at 49 when its broken down the trend line from the bottom. Also, when we consider current economic outlook, brexit etc. I think it will retrace till 44-40-36 before moving up again..."

[Mercury]

As you say  the BIG fish got away.  Alas I was away when it all happened but there you are.  For me it is all about managing scenarios, their likelihoods of being right and risk management around placing a trade against any of the scenarios.  So I actively track multiple scenarios on any given market until I get to a decision point.  One such occurred on Oil over the past 3 days and my scenario 1 from my past post was the one that proved correct.  I was set up to enter either and got Short before and after the EIA crude stocks data release yesterday.  The turn happened at the Fib 38% off the 9 June high.  So far so good but where do we go from here?

 

Again I have 2 scenarios as follows:

1. Lead is a return towards the lower daily tramline and Fib 50% ($40), which is then another pivotal point (drop thru or rally back up?)
2. Because the move up to 19 Aug turn can be counted as either an A-B-C or a 1-5 a Wave B could have been established on 2 Aug meaning the current move is a 1-2 and will turn up again forming a higher low vs 2 Aug.  We are at the Fib 50% down as I write, which is also prior support zone.  Fib 62% also a strong possibility.



 

[Mercury]

So the Fib 50% was the turning point on the hourly and now with a fresh higher high scenario 2 must surely be the lead set up right?  Of course there is now another scenario, which is that this move up is an A-B-C retrace, which would indicate a wave C ending point in or around 4700-50 area at a minimum.

[Mercury]

So I looked again at that alternative scenario I mentioned yesterday and now I think it is the lead scenario just now.

 

There is just too much resistance above, which would take a lot of bullish sentiment to break through.  The move up looks like an A-B-C to me with yesterdays rally constituting the bulk of the wave C.  I expect a final push up into the 4750 resistance zone, where there is also a junction of 2 tramline lines offering resistance and the Fib 50% off the previous rally high (Pink A/4).  With Neg Mom Div building on all time frames I am reversing my stance to bearish once more and seeking shorts off a rebound from the Fib 50% area with a target on 4000 initially.

 

Any thoughts please?

 



[donaldprice]

Not too shore, if we could be completing the W4 down to the 61 fib level on oil, however has just rejected the 50% retracement, therefore wait for confirmation of termination of WC. However as you quite rightly pointed out, the tramline on daily has not been kissed yet, therefore probably hold fire for now, although we are getting some neg momentum. Best wait for more confirmation.

 

 

[Mercury]

So looks like my first instinct that the bear move had come to an end in a Wave B was right.  The down trend cannot be in 1-5 now due to the overlap of wave 1 end.  Therefore an A-B-C ending up between $55-60 seems more likely.

 

Buy the dips I guess...

 



[donaldprice]

Hi Mercury, as you suggest, always best to review your analysis often, as I have found that we some times allow our eyes to see what we want, instead of what we should strictly see, hence why these strict rules in our strategy help us keep out of trouble. I don't know your opinion and I know I have created once again a double zigzag, but it does suggest that this is the case which would support then the analysis. Might also add that the RSI or in your case very similar the stochastic is only approaching oversold, which therefore suggests further that we can presume this a continuation of the previous daily bullish trend.