Oil looks attractive

January 3, 20132 Comments

Seasonal patterns usually suggest a strong market from February until the spring for energy -particularly for oil. I’m of the opinion that this year may be a good one for this seasonal trade. The daily chart above shows a nice breakout from a basing pattern, and an attempt at breaking through the 200 day MA. Yes, oil is overbought at this time, and may pull back a bit from current levels. Note the overbought extremes on the stochastics and RSI oscillators at the bottom of the daily chart.

The big picture is becoming bullish — note the recent spike in outperformance by WTI vs. the TSX (middle pane below the daily price chart). A long term symmetrical triangle seems to be forming for WTI Crude, as you will see on the weekly chart below. A breakout through $93 would be considered extremely bullish. The traditional way of measuring upside potential from a symmetrical triangle is to measure the total movement at the wide, left side of the formation – and then project that movement forward from the breakout. Thus, the prior movement that took oil from $110 down to $80 in early 2012 implies about $30 upside – or $123 for crude. The logic behind such measurement suggests that the volatility previously displayed when the security was trading so violently will return upon a breakout. Be aware that a downside breakout from the triangle implies an equal $30 downside movement.

While I respect the logic behind such measurements, I tend to place more faith in technical resistance as a target, especially in the rapidly changing and highly volatile markets of today. Thus, I’d target a maximum upside of about $110 (2012 high level) should this large symmetrical triangle break out.

Either way, the profile for crude is improving, and should be watched for a sustainable breakout through $93, especially as we approach February.

 

Keith on BNN MarketCall Friday Janurary 4th 6:00pm

I’ll be on MarketCall Tonight with Mark Bunting tomorrow – Friday January 4th at 6pm. Start your weekend off with some technical analysis!

2 Comments

  • MARY ANN BARTELS, MERRILL LYNCH’S T.A. PREDICTED ON CNBC THAT THE S&P500 IS SET FOR A 10-15% CORRECTION IN THE FIRST QUARTER OF 2013.

    – PERCENT OF S&P500 STOCKS TRADING ABOVE THEIR 50 DAY MOVING AVERAGE HAS INCREASED TO ABOVE 80%, A LEVEL THAT INDICATES AN OVERBOUGHT MARKET.

    Reply
    • Wow–15% would be much more than I would call for. But I do see her logic–I noticed the % above 50 day MA is high. also, VIX is down to “complacency” levels.
      I’d only call for a healthy 5-10% correction–the bulls are in charge and no sense fighting them for now.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Never miss another blog post!

Get the SmartBounce blog posts delivered directly to your inbox.

Topics

Topics

Recent Posts

sector performance 22 days

Sector rotation update

budget 2021

A heads up on the budget, and a rant

HMMJ

Buy the rumor, sell the news

% stocks over 50 day MA

Bear-o-meter says risk is neutral

sentiment cycle

Potential market top approaching?

mtum

Get ahead of the next momentum trade

cta-bg

Never Miss an Opportunity

Sign up for our newsletter to receive valuable insights that are available only to subscribers.   Beyond the blog – beyond the videos – get the inside scoop.

Scroll to Top