Thursday, July 1, 2010

Temporary support likely to give way for crude oil and gasoline prices that appear turning to downtrend again

Crude oil and gasoline were down today (unlike natural gas which has a path of its own), and to my eye it's part of a trend reversal that will take both down deeply. In fact, it is possible that the entire rise since late 2008/early 2009 could be characterized as a choppy, counter-trend bounce. If that's the case, then it might perhaps be an Elliott Wave "B wave" but I don't want to claim that's a certainty since the length of time seems longer than a B wave should be - I'm just not certain about that. But I do believe a retest of those 2008/2009 lows may be on the way.

Price fell steeply already this week from the channel line retest I described in my earlier post(s). It tested lower Bollinger Band support today, so that may suffice for a bounce or consolidation. Check out the 50-day moving average (MA) crossing under the 200-day MA - that's a bearish cross that also goes along with the idea of a trend reversal. It's in both the $WTIC (oil) chart at right, and the USO (gasoline ETF) chart below. At bottom is my monthly chart of $WTIC.

On my monthly chart, you can see that crude oil has fallen under that big channel trendline, but still above the monthly Bollinger Band midline. But the indicators are negative. So long as that StochRSI indicator (upper part of the monthly chart) is down there, it's a signal to stay on the selling side until it crosses back up again. Meaning, the StochRSI doesn't necessarily tell you that it's oversold, it's more of a trend indicator and doesn't signal a turn until it's crossing upward again from the solid area under the 0.2 level.

As I posted previously, I can see a target for crude oil around $50 which could also go along with a test of the lower trendline on my monthly chart. Obviously, falling under that would be even more bearish for crude oil price targets.

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