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

vix

Neartermed risk, economy, and the Commodity megacycle

nikkei long

History lessons

spx historical trend

More market musings

steve jobs

Advice for Advisors

dow theory

New Opportunities!

eye of storm

Trading within the eye of the storm

Keith's On Demand Technical Analysis course is now available online

Scroll to Top