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OIL: The Pattern Remains Dicey

Weekly time frame:

  • Oil is probably in a bottoming phase (I don't know if THE BOTTOM or retracement of the decline from the May high)
  • The decline from the summer 2015 high could have formed a Falling Wedge
  • If the Wedge plays out the rally should be sharp even if it were a countertrend move
  • The first step is to breach the upper converging trend line, the second step is to reclaim the last lower high at 34.82
  • If both hurdles are overcome Oil could aim at Target Box 1 = 39.60 - 41.19 (20 wma- 0.382 retracement) and even at Target Box 2 = 45.87 - 50.55 (0.5 retracement; 50 wma; 0.618 retracement)

Crude Oil Weekly Chart
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  • Weekly oscillators are mixed: RSI is displaying a huge positive divergence, however the MACD remains with a bearish signal cross in force

Crude Oil Weekly Momentum Chart
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Daily time frame:

  • Oil is having a tough time to breach the trend line of the assumed wedge.
  • Yesterday's eod print above it has been followed today by another failure with and Inside Day candlestick. It is not a positive signal but I would give the benefit of the doubt that a break out is still possible as long as the support at 29.67 holds. If instead this support is breached then odds could favor a retest of the February low.

Crude Oil Daily Chart
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  • Neither the internal structure of the advance from the February 11 low is too compelling for the bullish scenario, as Oil has risen with a three wave up leg (ABC) that can be vulnerable. Above the support located at 29.67, the loss of the trend line from the February 11 low could be a warning that this is only an oversold bounce. For this reason the pattern remains dicey

Crude Oil 15-Minute Chart
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  • The bearish scenario could pan out with another Falling Wedge. If this is the case even though oil would establish a tradable bottom probably the equity market will struggle during the decline of the last wave of the assumed wedge

Crude Oil 60-Minute Chart
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  • Daily oscillators are also giving mixed signals: The RSI is showing a positive divergence, although so far it has been rejected twice at the 50 line, while the bullish signal cross of the MACD is not too convincing

Crude Oil Daily Momentum Chart
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