Crude Oil Looks Great in Bond Terms

Crude Oil ($CL_F, $USO) has been running higher in a bullish pattern for a few months as I have mentioned in daily chart postings to StockTwits. But it has also recently entered the debate about the flow of funds out of Treasury Bonds ($TLT, $ZB_F) in a loud way. The ratio chart below shows the dart of a break out of a Cup and Handle Pattern. The target of this pattern is a ratio of 1.05, 22% higher than the current level. With Crude Oil at about $97 per barrel now and the Bond ETF just over 115.50 that could be accomplished at the extremes by a move in Crude to $118 per barrel

oil-bonds cupnh

or Bonds down to 94 or about a 1% move in the long bond yield. These are lifestyle changing levels. Of course this path will likely be some where in between for both, but still this is a large potential opportunity. And there is consensus from a review of the harmonic patterns. The second chart shows that the current price action is with in the bounds of two patterns, both bearish. The first is a bearish Gartley with a Price Reversal Zone (PRZ) centered on a ratio of 0.928 or 11% higher. The second, on a continued move up is a bearish Crab with a PRZ centered on a ratio of

oil-bonds harmonic

1.253 or 49% higher. So the harmonics have the old school Cup and Handle surrounded. It is nice when multiple methods of reviewing a chart give similar scenarios, large upside in this case. Add to these that the Relative Strength Index (RSI) is also bullish and the chart in the accumulation mode and it seems all you need is that entry trigger.

Join the Dragonfly Capital Views Premium Membership

Sign up here to get deeper analysis and nearly 50 trade ideas every week.

Dragonfly Capital Views Performance Through January 2013 Expiry

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog