West Texas Intermediate Crude Oil futures (WTI) Friday closed over a key previous weekly high over $55. WTI had been lagging behind Brent as shown in the BrentWTI spread widening. After a series of break and retests where to now?
West Texas Intermediate Crude Oil futures (WTI) Friday closed over a key previous weekly high over $55. WTI had been lagging behind Brent as shown in the BrentWTI spread widening. After a series of break and retests where to now? We look at what is going on technically.
Chart A: Daily a series of A-B-C After breaking and retesting cloud in break and retests
We look top – down with our analyse from monthly through to 4 hourly charts so as to give clear alternativers. In this chop it is important to avoid the chop and sometimes the best trades are the ones you don’t do. On our charts we use simple Ichimoku clouds with Keltner bands and look for patterns.
The Daily pennant break on the chart above (Chart A). Note the spit and potential for the throwover (Adams Theory) on a reversal. Use the Keltner band shown or Hurst channels with the Ichimoku Cloud and the Chikou which trails lotted 22 periods behind the price action. Remember we look for confluence with this and Murrey Math and the periods backs helps guage optionality of the market.
Chart B: Weekly Close Above Pink Line
When we look at the longer term Weekly and Monthly you can see the clear 3 waves – ABC if corrective, which would mean new lows or a double zig zag. The bullish alternative sees that C as a (III) of some degree.
- In the first bearish scenario the 1-2 we are in now is part of an X or 5.
- In the bullish alternative all this work since the C or (III) is the (IV) for higher. Note the correction from the high and low was 61.8% on the weekly. This cant be ignored and tells us given the higher probablity of the golden ratio we work Fibs and clouds and Murrey Math off that. Remember its all math.
So mathematically we have clear alternatives and we work backwards shortterm through four hours to get the channels and spits is we work down. Use your 240 clouds and 240 Murrey Maths as a guide.
The are a number of conflicting or outside fundamental possibilities.
- OPEC and Russia
- Production
- Geopolitics
- U.S. exports
- Unknown such as legislation, maintenance or trader ‘over positioning’
Now if you have traded oil long enough you know that any of these can happen and you also no the effect will be exaggerated and the move will be talked up. Oil, like natural gas has a tendancy to be very crowded with massive derivative positions within a cowboy mindset. As a such be aware of the alternatives and the oprionality.
We are going to keep this simple – work down through Monthly to 4 hour. Know the clouds the ABC or 123 and the channels and larger fibs. The different time scenarios give you an idea of what can happen and help you check your opinion at the door.
Chart C: Monthly with Cloud above and channel off initial low
With energy markets, especially oil and natural gas nothing is as it seems and don’t believe the hype (either way).
We will update periodically and look forward to your thoughts and outlook.
Trade Smart
KnovaWave @knovawave