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The recent action in Crude Oil has been truly remarkable. After testing prices just shy of 150, the market
has pulled back and it is approaching a critical juncture for t his entire move.
Click the following 10-year weekly chart and take a gander at this
incredible trend! |
| Crude
Oil Continuous (CL_#F) - Weekly |
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From Harmonic Trading perspective, the action has recently reversed from a distinct
daily 3.14 (pi) extension from last year's decline. Although the
price exceeded this target by nearly $10, the long-term charts show
that this projected harmonic resistance is capping the current rally -
for now! |
| Crude
Oil Continuous (CL_#F): 3.14 Bearish Extension - Daily: |
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Although this appears to be overextended from Harmonic
Trading perspective, the overall trend is sitting in a unique technical position that has demonstratively exceeded historic resistance levels.
Not to mention, the substantial continuation of this predominant trend
above the prior historic highs suggests that this remains bullish in
the long-term. |
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The rally in the past year has been unprecedented in its own right and it would be difficult to immediately assume that crude oil will repeat to the same
magnitude this year. Therefore, this market - and for that matter all markets - will experience retracements even in the sharpest rallies. In light of natural realities, the predominant trend remains bullish and any corrective price action should be considered a potential buying opportunity of the eventual continuation of this long-term move.
If we are in a short-term pullback within the long-term uptrend, the
obvious question is: Where is the next set of support levels? |
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In the short-term, it is important to note that this recent extended rally reversed from an extreme 3.14 extension,
typically signifying exhaustive price action. From pure price perspective, this must be weighed heavily until
the current consolidation produces a distinct structural and/or technical buying signal. Essentially, I am looking for the current retracement to develop a distinct harmonic structure that coincides some type of a clear
Relative Strength buy signal. In addition, the current consolidation should bring us back to the trend line of the past several months. Therefore, this market still has time to pause after a strong first half of 2008. |
| There are
several harmonic levels that were exceeded on this latest rally
to 145 that are setting up to define the next likely support
zone. From a general HT perspective, there are two Bearish
AB=CD patterns that completed above the $120 level. The
weekly Bearish AB=CD completed in the $121 area, while the daily
pattern completed around $138. |
| Crude
Oil Continuous (CL_#F): Bearish AB=CD - Weekly |
| Crude
Oil Continuous (CL_#F): Bearish AB=CD - Daily |
| These failed
patterns provide a general longer-term range for possible
consolidation. The short-term action is pointing more to the
$120 area for a more significant retracement low, as the daily
chart over the past two months possesses a nice Extreme Bullish
1.68/2.0 Harmonic Impulse Extension at a Bullish 0.886
Retracement from the June low. |
|
Crude
Oil Continuous (CL_#F): Extreme Bullish 1.68/2.0 Harmonic
Impulse Extension at a Bullish 0.886 Retracement |
| These
short-term levels coincide with the failed daily Bearish AB=CD -
an area were prior resistance is now acting as support.
Therefore, it appears very likely that a thorough test of the
entire $120 level is required before the current uptrend can
resume. |
| What about the long-term?...When I discuss the potential scenarios for the long-term trend of crude oil, I am strictly speaking of price analysis. No matter what news stories blanket the headlines, the essence of where crude oil is headed
can be found strictly within its price. So, it is important to study the past price history and the relevant technical factors that provide the tools necessary to understand the overall trend and potential changes that develop to successfully navigate the market.
From the general perspective, the mere fact that price of crude oil has exceeded historic levels with
immense ease truly underscores the power of the current long-term trend. Although it appears that the action on the past year
is beginning to take on more of a parabolic nature than previous six years, there is plenty of room to the upside before any peak is in place. |
| The critical
harmonic level to keep in mind is the 0.382 trailing retracement
for both the daily and weekly charts. e short-term levels
coincide with the failed daily Bearish AB=CD - an area were
prior resistance is now acting as support. Let's look at
the daily and the weekly. |
| The daily
0.382 retracement is calculated from last year's low to the
recent peak and it is projected at the $110 area and sts a few
bucks above the accelerated trendline of the past year, as well. |
|
Crude Oil Continuous
(CL_#F): Bullish 38.2% Retracement - Weekly |
| The weekly
0.382 retracement is calculated from the 1998 low to the recent
peak, encompassing a 10-year of bullish trend. The weekly
0.382 retracement sits at $95. Short-term levels
coincide with the failed daily Bearish AB=CD - an area were
prior resistance is now acting as support. |
|
Crude Oil Continuous (CL_#F): Bearish AB=CD -
Daily |
| These charts
clearly outline the critical levels for the next several
weeks. I would wait to see the action on this next test of
the $120 area. Also, the daily 0.382 retacement at 110
establishes the low range for this pullback. It appears
that the current slide will test this general area sooner rather
than later. I will update the situation beyond this
technical support. For now, it is important to keep these
harmonic levels in mind and prepare for one of the most critical
tests in the next few weeks of the entire 10-year bull market in
Crude Oil. |
