Technicals | Jan 16 2012
LAYMANS:
If financial markets in general can continue to slowly yet surely ebb and flow higher, then it will symbolise a belief that a more robust economy is building. And this will likely reflect in higher Oil prices. Yet beliefs are only that. And there is often a fine line between belief and perception and what is actually reality. Personally I think overall, markets still require further time to resolve themselves from the serious issues they have been plagued with over the past few years. And as we have seen, this will entail periods of fear and lack of confidence within strong moves lower, followed by periods of optimism and confidence within strong moves higher. I lack confidence though that a sustained trend in either direction is ready to establish just yet. And that basically means that longer term indecision will likely reign supreme for a little while longer just yet. And a consequence, markets seen as economic barometers will continue to show similar characteristics during this time . And Oil is one of them.
TECHNICAL:
We were looking for price to break higher out of the proposed flag pattern and for the moment it has duly complied. Our main concern related to an unimpeded run higher was the 104.00 – 105.00 line of resistance. And this is presently making its presence felt with price post the break stalling a little around the 104.00 price zone. Don't be surprised to see a retest of the upper boundaries of the flag pattern around 98.00 – 99.00 over the coming days. Yet for the upward price trajectory to remain intact, we really would not like to see levels head too much lower than this. And certainly not break deeply back into the pattern in any shape of form. This would invalidate the pattern and see us reassessing where the trend presently sits. Until any such scenario unfolds though, our view is that price is still going to head higher, with any short term dip right here merely being a precursor to a swing higher that will gather momentum and push clear of the overhead resistance line. Wave-A vs Wave-C equality is what we are looking for here on the immediate count. And that measures in at 120.84.
The double top zone circa 117.00 may be an inhibitor to 120.00 being achieved, yet lets just say the move higher we are anticipating, is looking to head towards this general vicinity. Nothing further to add here. Some slight weakness shorter term may still be witnessed before momentum can start dominating again. And if 98.00 can continue to hold, our higher target zone area continues to be in our sights. This would then lock in our Wave-(B), with the potential for another downward move via a Wave-(C) to follow. Longer term, and even though all these price patterns have been corrective in nature only since early 2009, higher levels are continuing to be targetted whilst price remains within its slight upward bias. They just may still be a year or two away.
Trading Strategy
12/1:
Aggressive traders that took on positions from our last review a tick above 97.63 should now place stops at break even. Trading Crude Oil is for experienced traders only yet even so, very vigilant risk management is essential on this contract. For those that waited for the break above 102.63, place stops at 97.63 as well. Nothing more to do here for the moment. The analysis will start to look shaky on any move below 98.00, so ideally any tagging around or just above this area will be confronted with committed buyers, and trigger a more sustained move up and into our target zone.
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Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
