Commodities | May 02 2011
LAYMANS:
Crude Oil was sitting around 108.00 USD per barrel at our last review and our targets on this immediate leg higher were continuing to centre around the 113.00 – 116.00 levels. Price has since tagged 114.05 and although we could still stretch a little higher towards our upper end targets, there does appear to be some resisting factors on the horizon here. Although recent price action has been positive, we continue to really not expect anything too far past our targets before another retracement takes hold here shorter term. Remaining bullish longer term yet while price remains choppy in nature, the conviction we would like to see to press for a strong surge higher is presently lacking. Steady as she goes for the moment. The all important resistance area around the 102.00 price zone has finally been broken past. It is now just a matter of seeing whether this area can now form a supportive platform from which to make its next more decisive impulsive run higher. This may take a many number of months just yet, although it is certainly ensconsed within our longer term views.
TECHNICAL:
Price action remains choppy and overlapping. Even though the bias remains to the upside, these types of patterns are corrective in nature and as such, even though higher levels are being seen here, the run up remains far from impulsive in nature. As such, we continue to run with a larger (A)-(B)-(C) type move as continuing to unfold off the February 2009 lows. With a final Wave-(c) of (C) still progressing as part of our ongoing, highest probability wave count. The higher degree Wave-(A) vs Wave-(C) equality target has been attained at 113.00, with the intermediate degree Wave-(a) vs Wave-(c) equality still in sight at 117.00. So levels just above 114.00 have now been achieved so we are well and truly in the zone as to what was being projected here in relation to this immediate move. A couple of things to be aware of as things presently sit. In last nights trade prices closed just above 112.00 with any immediate push above the 114.05 levels tagged just a few weeks ago almost certainly seeing some Type-A bearish divergence coming into play. I also have some minor concerns in regards to the lowering volume attributes associated with the recent run higher over the past couple of weeks. It certainly lacks bullish conviction and combined with the divergence that may show its hand over the coming days, the argument for alot higher prices certainly lacks strength. Lets see what transpires over the coming weeks. Put it this way though, if price does attempt to push higher yet again over the coming days, our expectation is that short term strength is going to be very difficult to sustain.
Trading Strategy
27/4:
Price is right in the zone here now in relation to our targets, with our recommendation being to respect the price targets at 113.00 – 117.00 and take profits on any weakness within this zone. If you have taken profits, the trade has proven to be very profitable and we will now wait to reassess the trend over the coming weeks before looking at taking another position. For those still running with the trade, it is now time to raise the stop again to lock in further gains by placing the stop just below the recent pivot point down at 105.90. Price is right in the zone here at present levels so if it does break higher yet again on weak volume and with bearish divergence, then consider taking profits at these higher levels as a valid strategy.
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