Crude Oil Nearing Exhaustion

By: Bob Loukas | Fri, Jun 26, 2015
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Crude Oil Nearing Exhaustion

For an asset like Crude, which is normally extremely volatile, the current prolonged sideways range is very much out of character. Crude has us accustomed to daily swings of 2% to 3%, and to shorter term rallies/declines that draw in traders before reversing suddenly. Crude is generally an asset that fluctuates in price, so the current "flat-line" action is rare. Since the last Daily Cycle peaked on May 6th, Crude oil has been locked in a sideways trading range. Short term traders, expecting the usual crude oil volatility, are being chopped to pieces.

As a result, Crude's Bollinger Bands are now the tightest they've been in over 2 years. And, as with every asset I track, tight Bollinger Bands are almost always a precursor to a significant move. I'm confident that Crude's next move will be extremely sudden, and is likely to extend far outside the Bollinger Bands before coming to an end. The only question is the direction. I believe that it will be higher, but this view is pure speculation. And the longer the move takes to develop, the more likely it is to, instead, be a bearish move down. From a position standpoint, traders should focus on a sizable move and volatility, as opposed to being fixated on any one direction.

Within my premium member reports, I have been warning for months that the rally off the March lows is counter-trend in nature. I continue to believe that Crude oil has entered into a bear market period and that once this reactionary move is exhausted, crude will continue its new primary trend lower. That said, I believe that counter-trend move has some life left, so I am siding with the view that Crude will see an upside breakout before finally reaching exhaustion.

$WTIC Light Crude Oil - Spot Price (EOD) CME
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Bob Loukas

Author: Bob Loukas

Bob Loukas
The Financial Tap

Bob Loukas is the founder of "The Financial Tap", a membership site dedicated to helping traders and investors navigate the markets while increasing their expertise and understanding. Bob has over 20 years of experience in trading the markets, is a life-long student of economics, and has an abiding passion for the financial markets. Much of his investment philosophy is top-down in nature, beginning with a global and macro outlook which is used to create a framework that drives his intermediate investments.

Bob is a leading expert in Market Cycles. His love of Cycles grew after his introduction to the work of Walter Bressert, one of the pioneers in the field. Cycles were a natural fit with Bob's passion for top-down analysis. As Cycles are intertwined on multiple time frames, understanding the global outlook greatly helps him to identify the long dated Secular Cycles. From that point Bob is better able to identify the shorter Cycles and to build a cohesive investment strategy. Bob's Cycle Analyzer, a software based analytical and intelligence system, is used to predict the future movements of the major financial markets.

Originally from Sydney, Australia, he is now settled and has been working in New York City for the past 13 years. His background and education is in Computer Sciences and he holds a bachelor's degree from Monash University in Melbourne Australia. He has extensive experience in the Financial Software area and has served as a senior executive at various Fortune 50 management teams developing financial trading and reporting software.

Happily married with two children, family is a big part of his everyday life. Other passions including golf and long distance running. He plans to complete the 2012 New York City marathon.

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