Sunday, May 22, 2016

Crude oil $WTIC $CL in a B wave up--or more bullish?

Crude oil hit a significant low when it tested $26, but is it only making a countertrend rally (for an important B wave), that will eventually give out, before descending to new lows?  Or could it be starting an entirely new set of bullish waves up, that will eventually exceed $147?  Let's review some Fibonacci levels that should help determine the more likely answers.  First, here's a daily chart of $WTIC, which recently tested $48.23, as the 61.8% retrace to prior swing high.  It's possible that even this level could be a top resistance sending crude to new lows.

So for now, we want to avoid getting or staying seriously bullish unless $CL $WTIC can close and stay above $48.63.  One of the positive factors is that it's above this month's pivot, and the pivot-support-resistance levels for June are higher than for this month (helping view as an uptrend).  The bullish perspective is also helped by the point-and-figure (P&F) chart which sports a $72 price objective, particularly so long as it remains above the $44-$45 support area.

Next, let's look at a weekly chart for WTIC, which does have positive indicators and shows it's above its yearly pivot of $44.73.

Big picture, crude oil $WTIC $CL hit a Fibonacci 78.6% retrace back to zero ($0), at $31.51.  That's the ultimate retrace level, back toward zero $0, so either the $147 was to complete all-time high top, or it completed its total retrace and is now starting an entirely new set of waves up.  If it reacts poorly around the other Fibonacci retrace levels, that will be a clue that it's only making a bearish B wave countertrend rally.  The 61.8% level was at $56.26 and the 50% would be $73.635 (now resistance); and the 70.7% retrace level was at $43.15 (now to be considered an important pivot, and adds to the support area $43-$44). One implication is that, so long as $WTIC $CL remains above $43.15, it can aim for $56.26 and then $73.64 (which is interestingly close to the P&F projection of $72); above that, it's probably charting a new bullish path higher, not limited to a B wave up.

For the monthly chart view, let's first note that the resistance level where it currently stalled was also at the monthly Bollinger Band midline:

Another monthly chart view also shows the positive divergence at its low, and shows an uptrend channel - which broke, except it may prove useful for gauging a new uptrend channel.  Not all indicators have turned positive though.  So we still need to gauge how crude WTIC CL reacts at the levels I've identified in this post, to determine if it's more likely uptrending for a new set of bullish waves eventually leading higher than $147:


But crude might have topped out for good. In this scenario, the implication is that crude $WTIC $CL has embarked on a large countertrend B wave (to be counted as three waves - abc - up) that can retest $86.66 (or conceivably a higher retrace level).  For that scenario, the following monthly chart - probably with slightly adjusted trendlines - may provide the best framework:

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