OIL - CLOSE TO FORMING SIGNIFICANT LOW
My last oil chart posted some 10 months ago anticipated a drop to 35 area in 5 wave decline from Aug 2013 high (chart link below). That has been met and some.
Some details have changed from last chart but not in the way that would make significant difference, therefore, I will not repeat the thinking behind my analysis, but rather focus on what I think appears to be clearer and will help in trading planning.
Media and commentators are now coming up with some extreme targets and based on some fundamentals, USD strength and geopolitical developments. Therefore, I suspect that the price action could frustrated both the Bulls and Bears before clearer directional move develops.
Here is the summary of observation from the chart:
1. The decline from 2008 high is evidently in 3 swings even though it looks very impulsive and dramatic.
2. The rally back up from the low in Jan 2009 to May 2011 is also in 3 swings retracing just over 61.8%.
3. Subsequent decline from May 2011 is also in 3 swings, a, b, c which is 5 wave from Aug 2013 still in progress but could be close to completion, ie it is in final stage, wave "v" of 5.
4. Wave "v" of 5 so far appears to be forming and ending diagonal (falling wedge) though not yet confirmed.
5. The drop so far since May 2011 has reached approx 75% of the price and historically in 1990 and drop in 2008 both terminated at 75% & 77% (approx) respectively (see chart below)
6. If the above observations hold and in particular we have final wave "v" of 5 as ending diagonal, then the low could form between 25 - 27 or little lower but doubt it will hit 20 which is widely expected in the media.
7. Low in this region would make a total retracement of 88.6% of the move from 1998 low to 2008 high and is in proximity of other Fib projections.
Beyond that, since the price action has breach the 2009 low, the idea outlined previously of potential triangle is no longer in play. Instead what we might have (not confirmed) is a leading diagonal which has 5 waves consisting of 3 swings each, ie 3-3-3-3-3. OR some other combinations. Regardless then anticipated rally will be limited to 60 -70 zone before further weakness develops.
Under this scenario the 2008 high would not be surpassed for many year to come. May be even decade or more to come. However in the meantime the anticipated low will allow longer term bullish trade to be considered directly on Oil or shorting the companies whose energy bills form significant part of operating cost such as airlines and transport.
As always, do your own analysis for your trade requirement. Select to follow me and the chart for notification of future updates. If you like the analysis then please indicate this by thumbs up, constructive comments and sharing with others. If you have an alternative idea then please share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
danv-charting.com
Some details have changed from last chart but not in the way that would make significant difference, therefore, I will not repeat the thinking behind my analysis, but rather focus on what I think appears to be clearer and will help in trading planning.
Media and commentators are now coming up with some extreme targets and based on some fundamentals, USD strength and geopolitical developments. Therefore, I suspect that the price action could frustrated both the Bulls and Bears before clearer directional move develops.
Here is the summary of observation from the chart:
1. The decline from 2008 high is evidently in 3 swings even though it looks very impulsive and dramatic.
2. The rally back up from the low in Jan 2009 to May 2011 is also in 3 swings retracing just over 61.8%.
3. Subsequent decline from May 2011 is also in 3 swings, a, b, c which is 5 wave from Aug 2013 still in progress but could be close to completion, ie it is in final stage, wave "v" of 5.
4. Wave "v" of 5 so far appears to be forming and ending diagonal (falling wedge) though not yet confirmed.
5. The drop so far since May 2011 has reached approx 75% of the price and historically in 1990 and drop in 2008 both terminated at 75% & 77% (approx) respectively (see chart below)
6. If the above observations hold and in particular we have final wave "v" of 5 as ending diagonal, then the low could form between 25 - 27 or little lower but doubt it will hit 20 which is widely expected in the media.
7. Low in this region would make a total retracement of 88.6% of the move from 1998 low to 2008 high and is in proximity of other Fib projections.
Beyond that, since the price action has breach the 2009 low, the idea outlined previously of potential triangle is no longer in play. Instead what we might have (not confirmed) is a leading diagonal which has 5 waves consisting of 3 swings each, ie 3-3-3-3-3. OR some other combinations. Regardless then anticipated rally will be limited to 60 -70 zone before further weakness develops.
Under this scenario the 2008 high would not be surpassed for many year to come. May be even decade or more to come. However in the meantime the anticipated low will allow longer term bullish trade to be considered directly on Oil or shorting the companies whose energy bills form significant part of operating cost such as airlines and transport.
As always, do your own analysis for your trade requirement. Select to follow me and the chart for notification of future updates. If you like the analysis then please indicate this by thumbs up, constructive comments and sharing with others. If you have an alternative idea then please share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
danv-charting.com
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