Crude oil price's risky rally, and the anatomy of a kiss

We don't post so much about oil anymore, because the daily chart has been - well, boring - with the anemic rally off the lows. Sure, it's been a decent long trade, no complaints there, and the percentage increase has been great. It's just looking tired. On the daily chart, I had identified a probable triangle in the chart of one of the ETFs - USO - after which it put in a low. Conversely, the futures contract measured by $WTIC put in either a truncated diagonal low or a B-wave. The movement up looks like it's observing a good parallel channel. I believe it can get to $55 but I also took almost all my position off the table thinking it may have a small 4th wave before it can get there. Cautionary signs include the faster-moving indicators slacking off, overhang price resistance signaling turbulence, price has been pushing the Bollinger Bands perhaps enough for now, and that 200-day moving average is still declining. But there are some signs to consider also on the monthly chart, which I'll comment on (below the charts). Here are the daily and monthly charts of $WTIC:

You can see that price dropped under the long-term parallel channel (that looks like it has 1x1 Gann angle trendlines), got support at the 200-month moving average (which we did point out here, at the time), and looks like it's reaching for a "kissback" toward that broken channel. The faster-moving indicators have starting curling up simultaneously. It often happens that price will jump back toward a moving average when a shorter-term moving average crosses it, and you can see that the 20-month exponential moving average (EMA) is in process of crossing under the 50-month simple moving average (SMA). There may be many looking for price to get back up to the 50-month SMA, but a more realistic target would be the kissback level for now.

You can also see that price pushed hard on the lower Bollinger Band (BB) as it tested the 200-month SMA. It signals there's also a possibility that price moves to the midline of that BB. But it doesn't have to go there in a straight line. The BB which moves about the 20-month MA as its midline, is also in process of descending which will provide a lower target for that method as well.

The ADX-DMI on the daily chart shows that the modest trending level is weakening, and that indicator on the monthly chart hasn't even finished coming out of downtrending mode. Long-term swing traders and position investors will want to see the MACD and other indicators turn around and improve on the monthly chart before investing in long positions - that will take some time of course.

From an Elliott Wave perspective, I can see the rally as either the C-wave of a diagonal that can have another big rally ahead, or as a fifth-wave thrust out of a triangle. Lacking more historical data makes it difficult to select which has the greater probability. Frankly, I don't feel I can discount the diagonal idea right now. Sometimes a channel trendline break can signal that a diagonal will set in - just not always. But the charts indicate there will be sufficient time ahead within which to make that decision. I'm not moving into a short position, just going mostly flat for now to watch it. For now, I want to watch what happens if we do see $55 in $WTIC and whether any pullback from there would get support at the new uptrend channel on the daily chart. Also, if it does plant a big kiss onto that broken channel trendline, that might be a good shorting opportunity.

(The Elliott Wave ideas I'm discussing in this post are my own - the label refers to Tony Caldaro's OEW, by default - and I'll try to circle back to pick up his OEW counts as well; for now, you can find his charts via his site in the list at right.)