What it Takes to Make a Bullish Long Term Call on Crude Oil

• Posted by Greg Harmon
• on December 20th, 2011

West Texas Intermediate Crude Oil ($CL_F) has a bright looking future. Maybe. Right now it is tough to make a long term case for it either way from the Monthly charts below. First is the Andrew’s Pitchfork. Notice how Crude rose to touch the bullish (green) Median Line and then

rejected lower in May. Since then it has now broken above the bearish (red) Upper Median Line and is heading towards the Hagopian Trigger Line (dotted line). Through that line would suggest a move higher and attraction back to the bullish Median Line. At the moment it is between the Median and Lower Median Lines of the bullish Pitchfork and could be attracted either way. The Fibonacci

levels on the chart above mark the move from the 2001 lows to the highs in 2008. The pullback from the high retraced just over 78.6% (a lesser used Fibonacci level) of the move up and then went back to test the 23.6% level. After falling from there to just beyond the 50% level it is pulling back higher again at the 38.2% level. A rejection here would lead to a move lover to the 50% level again whereas a break higher suggests another attempt at the 23.6% level and the previous high

at 147.27. The tighter set of Fibonacci levels above show the move from the 2008 high back to the lows of early 2009. The rise off of that bottom stalled after retracing 38.2% and then proceeded higher over a 61.8% retracement before falling back to the 38.2% level. Now heading higher again it is back at the 61.8% level. Through that level and expect a move to the full retracement at 147.27.

Adding in the traditional Technical Analysis approach shows several Measured Moves higher. The first comes from the 2001 low to the 2008 high move of 130.15 added to the 2009 low, making a target of 163.64. The second is from the 2009 low to the 2011 high move of 83.06 added to the fall lows of 76.96, making a target of 160.02. The third measures the move from May 2010 low to the the 2011 high of 49.71 added to the fall lows for a target of 126.67. All of these targets will require both the Relative Strength Index (RSI) which is moving lower, and the Moving Average Convergence Divergence (MACD) indicator which is negative to reverse higher. Also a move to a new high over the 116.55 area. A move over 103.81 would be a good start. Until then shorter calls are much more appropriate.

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