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UWTI: Short Setup

Daily time frame:

  • The rally from the February low has carved out a potential Rising Wedge
  • If the Rising Wedge plays it can be a reversal pattern, in which case the risk is that this rally is over (Price could resume the down trend with new lows) or it could be a Leading Diagonal, in which case even if the following pullback is sharp price would establish a higher low and resume the advance from the February low.
  • I would give a higher probability to the latter scenario. (The MACD has a new bearish cross but it is not displaying a negative divergence)
  • It is not clear if the wedge is done, although today's reversal could have truncated the last wave of the pattern.
  • If the wedge has truncated below Wednesday's lod (S1) we have three major key price levels:
  • G1 (Gap) which coincides +/- with the 50 dma and the 0.382 retracement = 24.15 - 23.68
  • (2) S2 = 21 (The 50 dma today stands at 24.15)
  • (3) G2 (Gap) at 19.80 (The 0.618 retracement is at 19.20)
  • If the wedge is a Leading Diagonal price could bottom in the range of the 0.5 - 0.618 retracement = 21.52 - 19.20

UWTI Daily Chart
Larger Image

60 minute time frame

  • In addition to the Rising Wedge there is a potential Head & Shoulder
  • If the neckline is breached the H&S has a measured target at 19.20 (coinciding with the 0.618 retracement)

UWTI 60-Minute Chart
Larger Image

 

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