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)
- Weekly oscillators are mixed: RSI is displaying a huge positive divergence, however the MACD remains with a bearish signal cross in force
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.
- 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
- 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
- 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