Oil is About to Become the New Gold

Despite it’s recent move higher Crude Oil is prepping for what could be a massive move up. Let’s build the case from the micro to the macro in terms of time frames.

WTIC Daily

On the daily chart (from yesterday) Crude Oil broke out of a symmetrical triangle in late September. It pulled back and retested the break out level in mid October, then advanced putting in a higher high and a higher low and is now moving up again. The daily Relative Strength Index (RSI) held and is rising again and the Moving Average Convergence Divergence (MACD) indicator is moving back towards positive. AS I write this Crude is up $2.50 at 86.67 today (December 1 2:11pm EST). Short term it looks better to the upside and soon it will be ready to test the 88.50 level.

WTIC Weekly

Crude broke out on the weekly chart (also last night) above the wedge at 81 in October. It muddled along for a couple weeks before rising and then retesting the breakout level which it held, and is now moving up. The long term trend from May on the RSI is rising and the MACD has been flat for a long time. The Bollinger bands have been steady but relatively tight. This also looks better to the upside.

WTIC Monthly

But it is the monthly chart that gets me the most excited. In the spirit of the season it brings to mind Sam Wainwright offering George Bailey an opportunity to get in on the ground floor in plastics in It’s a Wonderful Life. Crude Oil on this longer term scale rose from it’s floor of early 2009 to a plateau just above 67 in mid 2009. It has bounced around there taking a stab higher in May this year before coming back to the floor. Now it is moving again, but this time might be different. First, in May the 20 month Simple Moving Average was falling and now it is rising. Second the MACD was falling in May and is starting to rise now. Third and most interesting the Bollinger bands were $55 wide in May, down substantially from the peak width at $125 dollars, but they are now only $30 wide and tightening rapidly. The last time they were this tight Crude Oil started a run from $58 per barrel up to $140 per barrel. I am not forecasting $140/barrel oil. Not yet at least. But a $120/barrel target can be easily reached measuring a conservative RSI move. On the last move higher RSI went from 50 to 81.9 with a stall at 70. During that move the price of Crude Oil moved from $60 to $140 with a stall at $100/barrel. The rise to the stall represents a $40 dollar rise and would create a price target for the current move of about $120. If the RSI gets to the 82 level again it would suggest that $160 is possible. This will likely not happen quickly and there is resistance along the way at the 88.50 to 100 channel. But buying now with a stop at 81 could be like getting in on the ground floor. Hee Haw!

Sam Wainwright

(As always you can see these individual charts and more on my twitter feed and on chartly.)

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