The Longer Outlook in ….. Crude Oil

• Posted by Greg Harmon
• on January 28th, 2015

Crude Oil had a log flume like ride lower over the last 7 months. Except that the water at teh bottom has not splashed yet. This has many experts talking about the sustainable price of drilling via fracking and oil sands, as well as the break even cost for many Middle Eastern countries. There are discussions about how the drop is somewhat intentional to stick to Putin and Russia, or how the Saudi’s are trying to reassert themselves on the global energy scene following the US becoming energy independent. Lot of talk. And with every move lower in the black liquid come lower price targets from those same professionals and analysts. Nothing new here.

But for technical analysts talk is cheap. Oh, now all the narratives out there can have some value, but stories do not come with a timestamp and price move. The actual price data has a whole lot more to offer and then chart of Crude Oil below has a lot to say.

The first thing that stands out in this chart is the weighted volume at price bars on the left hand side. There was a lot of price history to work through between 85 and 105, and then still large history all the way down to 65/barrel. But since then the price history has hit a pot hole and that pot hole gets deeper until the price reaches 32.50/barrel.

The second thing to notice is that the price has broken the rising 16 year price trend support line, but settled back over it by month end. A close under it next month would be a major breakdown.

The target from the breakdown of the symmetrical triangle has already been passed at 56. And even the 200 month SMA is above the price now. What is left is prior support at 40 and 35 within the weakest price volume bar, and then a patch of strong volume from 25-32.5/barrel.

The green bar carries significance from a harmonic perspective as well. The bullish Bat shown has a Potential Reversal Zone at 27. That is a 88.6% of the move higher. Another Fibonacci level, 78.6% retracement, comes at 40.

The take away is that it is very late in the game to look to short Crude Oil but too early to look to get long. The Hammer candle in January could be the trigger if confirmed. But whether the bottom comes at 40 or 35 or 27 is nothing I can say for sure. And with momentum indicators in oversold ranges it could just as well stop in its tracks around the rising trend support line.

If the bottom does come soon there is no guaranty that it is followed by a bounce higher and not a long drawn out consolidation, like in the 90’s. A move back over 50/barrel may get me interested if that is also over the rising trend line. But otherwise I am comfortable sitting and watching it.

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