Oil's "bungee jump" last year led to snap rebound, but even the P&F chart went bearish again - watch these levels if gambling more "reflation" rally

The ideas of reflation include remaining open to oil possibly moving up again, with targets such as $85/90 mentioned by some analysts (and previously by the default P&F chart of Stockcharts.com). Readers should remember that we actually were able to call the top last month - ya-a-ay! Then, it dropped into the .382 Fibonacci retrace we also pointed out, with a modest rally since. But then it hit resistance at the 50 day moving average (DMA) - and don't forget that, even though there's an apparent "golden cross" with the 50 DMA above the 200 DMA, the 200 DMA was declining at the time. In fact, the 200 DMA is only now getting shallow enough to be almost level ... well, you can imagine it could be, anyway! Maybe it can continue higher, as some have projected, but the indicators are not confirming an uptrend at this time. The level around $70 from which oil fell back, is a 50% retracement to an important swing high, as marked on my chart below. What about on the monthly chart? You can see on that, bottom chart below, that oil did a "bungee jump" under my long-term channel trendline, then snapped back above it again... then got turned away by moving average resistance again, and poked under that trendline again ... then managed to close just about on it yesterday. So, what to do?

Of course, even if you believe in the reflation thesis, one possibility is to step aside and wait either for a breakout above $75 to catch a ride on. Or if you're bearish, or just want to trade another leg down if it happens, to wait for a breakdown and sell it/short it for potentially lower levels. If already in a long position, it seems reasonable to place a stop at the recent low, $58.72. I cannot be certain oil's going to the $20's, but I wouldn't want to hold long under $58.72 either while wondering.

What about that default P&F chart? Well such is the nature of them ... it's flipped from bullish to bearish (P&F chart at right) (click any image to see it larger/more clearly). Specifically, it now shows a bearish projection to $44. That wouldn't be a new low ... it could even be a place for another rally higher ... but those "investing in" or trading oil should watch this closely to be on the right side of this trade.