Crude Oil Bulls - For Whom the Bell Tolls / Commodities / Crude Oil

The oilbull still managed to score another day of gains yesterday. A meager advancebut still an advance, one could say. And be forgiven, as they would not havehad examined the full picture. Are we just teasing you now? Come on, therecan’t be possibly more to the story... There is. The scenario that we wroteabout exactly to the day two weeks ago, has come to fruition. The implicationsare far-reaching. Time to share.

Let’s takea closer look at the charts below (charts courtesyof http://stockcharts.com).

Yesterday,we wrote the following about Wednesday’s session:

(…)Yesterday’s session brought us another day of crude oil price gains, marking afresh March peak. While not minuscule, the accompanying volume was still lowerthan the day before. The jury is still out but we lean towards the bearishimplications thereof.

Take agood look at yesterday’s candle. While it is yet another close higher, it wasmade on an even lower volume than the day before. This tips the scales evermore subtly in the favor of the bears – just like the fact that the body ofyesterday’s candle was smaller than the Wednesday’s one.

Such pricecompression is a telling clue of a strong undercurrent at play. That is, theproximity of strong resistances nearby: the previously broken rising green support line and the rising redresistance line.  Yesterday’s close wasyet another close below both of them. All in all, this increases the likelihoodof an upcoming downward price reversal.

Additionally,there are clearly visible bearish divergences being formed between the RSI, theCCI, the Stochastic Oscillator and the price of black gold (we marked them withgrey rectangles on the above chart). It’s only the downward price move that ismissing to complete them for all to see.

All theabove doesn’t bode well for the oil bulls’ strength and increases doubts aboutthe space for further improvement. Do you remember when we discussed the ElliottWave perspective on March1st? We’ve mentioned the very real possibility of the 5th wavehigher, its target namely. Let’s bring up the chart updated with recent pricedevelopment and quote our thoughts from the March 1st Alert:

(…) Note the two yellow rectangles which show thatthe upward move between the February 11 low and the last week’s peaks was quitesimilar to the first upward move after the December low.

Such price action suggests that we could observe thelast impulse wave according to the Elliott Wave Theory. It says that the firstand the fifth waves are quite similar (in our case not in time, but probably inthe length). If this is the case, crude oil can still hit one more fresh peak,which will precede a bigger move to the downside.
Why is another fresh highpossible?
If we correctly marked thewaves of the upward December-February move, light crude is currently formingthe fifth smaller wave within a bigger fifth (marked on the above chart with5?) wave. In other words, if all the above assumptions are correct, the lastpeak is still ahead of us. One more note regarding the markings and assumptions– within Elliott Wave Theory, the wave counts and markings can change as thechart progresses to be in line with the underlying price action. The marketdecides – the waves structure, type and precedence of waves.
How high can the commoditygo?
Light crude can test theabove-mentioned red resistance line, which currently intersects the upperborder of the purple resistance zone. Here, the size of the fifth impulse wavewould be equal to 150% of the first wave. Nevertheless, if this area is broken,the next target would be around $58.74, where the fifth wave would be equal to161.8% of the first wave, which is slightly below the red gap.
What could happen next?
In our opinion, after apotential fresh peak, we’ll still see a drop to at least the green support linebased on December and February lows, but it seems more likely to us that we’llsee a decline to around $51.23-$52.30, where the mid-February lows and thebottom of a potential fourth wave are.

Before we summarize today’s Alert,please check what was yesterday’s intraday high… yes, $58.74 exactly.

On top, we’re seeing the first bearraid just now. Probing bulls’ defenses, crude oil currently trades at around$58.10 – fully erasing yesterday’s gains within a couple of hours, still beforethe U.S. session opens.

Summingup, short position in crude oil continues to bejustified from the risk/reward perspective as crude oil has reached veryimportant resistance levels. Combined with the progressively declining volumeduring recent increases, bearish divergences between the indicators and thecommodity itself, and clearly visible oil bulls’ problem overcoming thepreviously broken green support-turned-resistance line increases theprobability of a bigger move to the downside in the coming week.

If youenjoyed the above analysis and would like to receive free follow-ups, we encourageyou to sign up for our daily newsletter – it’s free and if you don’t like it,you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7days of free access to our premium daily Oil Trading Alerts as well as Gold& Silver Trading Alerts. Signup now.

Nadia Simmons
Forex & Oil Trading Strategist
PrzemyslawRadomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex,Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing listtoday

* * * * *

Disclaimer

All essays, research andinformation found above represent analyses and opinions of Nadia Simmons andSunshine Profits' associates only. As such, it may prove wrong and be a subjectto change without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Nadia Simmons and his associates do not guarantee the accuracy orthoroughness of the data or information reported. The opinions published aboveare neither an offer nor a recommendation to purchase or sell any securities. NadiaSimmons is not a Registered Securities Advisor. By reading Nadia Simmons’reports you fully agree that he will not be held responsible or liable for anydecisions you make regarding any information provided in these reports.Investing, trading and speculation in any financial markets may involve highrisk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as wellas members of their families may have a short or long position in anysecurities, including those mentioned in any of the reports or essays, and maymake additional purchases and/or sales of those securities without notice.

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.