Most of the time, macro fundamental logic plays fairly well with technical timing. In case there’s some draconian rally catalyst in the near future for Crude Oil — the previous statement has never been more untrue. However, the power of technical analysis helped us call the short term bottom in CL live on Twitter March 17th (albeit 12 hours and 40 ticks off the ultimate swing low):
Very possible s/t bottom is in for $CL w DW5 truncated. <$40 I’m looking for $16. >$55 = $58-$68 then resumption down pic.twitter.com/pmzXr36wbC
— Duncan Parker (@MinyanDP) March 17, 2015
And which we followed up with an article a few days later explaining why and where we believe crude will head next (as hinted above – it’s not entirely bullish)…
Crude finished the shortened week April 2nd with a tag of its quarterly pivot in what appears to be a healthy bull flag inside an hourly W5 structure. The next logical extension for crude while above its quarterly pivot would be the quarterly R1, in my opinion.
It’s somewhere inside that green box where I believe the next extension will exhaust (safe trade is $53 to QR1). The bigger picture shows that this may be too conservative — a possible Cup & Handle pattern has emerged targeting levels as lofty as $64:
How this plays out is the more tricky part. We could easily endure what’s thought to be a false breakout somewhere around $54. If consolidation and an ABC correction is to follow, the next likely setup should be a new 5W structure targeting as high as $71. If $54 is rejected (as expected) and firm support is found at/near breakout resistance ($52.50) it could be that Wave 5 itself has an internal 5W structure. At this point it really comes down to the strength of the catalyst next week. Should it be a weaker catalyst $53-$54 seems to be where we’ll peter out and begin an ABC correction lasting the majority of next week before a new set of waves higher. Second resistance around MR2 $57 handle would be the next expected extension should the catalyst be stronger and CL blows right through $54.50 — in this case $54.50 would be the 3-4 of W5 pullback target for the ultimate W5 target between $61-$64. Should this scenario play out, it’s doubtful a new set of waves higher will begin — W4 Weekly will likely culminate in the low-mid $60’s by the first week of May should this pan out.
My personal take is that this rally will happen more quickly than many expect. Weekly wave 1-2 was very broad in nature meaning W3-W4 should be sharp. By May, or at latest early June Weekly Wave 4 should be complete and Wave 5 down can begin its attempt toward breaking major support around the $40 handle.
All speculation at this point, but now you have an inside track on my map over the next few days and weeks. Once we know more via price action we’ll be able to better pinpoint the path ahead. The main takeaway? Be bullish even though it doesn’t feel good in a fundamental sense. My analysis says this is a setup for one hell of a short sometime this summer, but now is not the time to be biased short.
Good luck out there!
UPDATE 4/19/15*******************************
Overall, very satisfied with how price adhered to forecast. $54 was rejected as expected but support did not materialize until the $50 handle (vs. $52.50 forecast). Looks plausible we digest gains here after tagging the $57 level noted, although any sustained bid above $58 is a clue that the long trade could still be alive into $61-$64 before a larger pause. More analysis coming soon.
