Interdum stultus opportuna loquitur...

Wednesday, October 05, 2005

CrudeRant: Crude OIL, I Mean...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

J ust a quick note on Crude - I've been a little bit lazy on this, preferring simply to plonk clear-cut statements in the prefaratory remarks or the 'Energy Sector' bits of the USRant. I seldom have bothered to 'flesh out' the whys of the statements, or include a chart.

Below is a reasonably clear exposition of the technical "why"s and "wherefore"s of the 'head and shoulders' pattern I called for in the USRant from September 16th (scroll down to the "Energy" section)...

The high-probability end-point for this bounce (assuming $62.75 holds for the rest of the week, and on Monday) is actually way up at $67.50 - that would make a beautiful head and shoulders on the daily chart - which, when the left shoulder is broken, will project down to $54.65. The fact that Crude will reverse back up before it gets down that far is not hugely relevant - it will get down to the high $50's.

Here is what eventuated - the green 'blob' on the price chart is the point at which the September 16th pontification about Oil was made... which coincided with a close in Woodside of $32.28.

Note that the breach of $62.75 to the downside referred to the October contract, which was the front month at the time front-month - and as I've said since, it translates to $62.33 on the November which is the new front-month. 

The actual end-point of the bounce? $68.27 - 77 cents a barrel higher than I calculated, but the full-court press orchastrated by the mainstream media had something to do with that, as I said at the time.

Note that in formulating the RantPRO downside target at or about $57 - more than $2 above the standard H&S projection of $54.65 - I've clearly assumed that the slide will not actually get all the way to the 'standard' H&S projection. 

Why? Because Oil is in a raging bull market, silly; short side targets will always be hard to reach. There is no fundamental reason for Crude to undertake a genuine cyclical reversal, so the standard H&S reversal target is not going to be reached. 

If you examine the %R/CCI configuration, Crude will probably hit 'deep oversold' on the daily chart within a couple of sessions and try to bounce back to the neckline; from there it wil ldrop again to a lower low at or about my target, and at that time it will set a CCI buying divergence on the daily chart. pPerfect

Crude Oil Daily Chart