As the oil price was rising through the $81.00 level mentioned in yesterday’s tout, it was also breaking through the midpoint of an hourly pattern that had developed overnight. But this came after a 25-cent bounce off of that exact midpoint, which gives us high confidence in the pattern. Unlike the D target described yesterday, which hovers just below the 17-month high, this one, at 82.13, is truly hidden “in the middle of nowhere.” (Note: Yesterday we understated the 17-month figure by two months.)
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March Crude
We would have been ultra-cautious about trading a midpoint only slightly above the “B” point of a hidden pivot pattern, especially in the volatile crude oil market. But after surpassing that midpoint by only five cents, the market dropped $1.50. Oil bears who see this as the end of the recent rally should look for small patterns to provide shorting opportunities. If the market breaks the $81.00 level, however, we should look forward to a battle royale at the 15-month high. The D target of this pattern, at 84.74, is 22 cents below that high, so we might expect some intrepid pivoteers to be among the front-runners. _______ UPDATE (1:58 p.m. EST): In volatile trading after an inventory report, oil rallied above $81.00 and then settled back somewhat. Oil traders should now be watching for small bullish patterns.
A robust pattern on the daily chart points downward to a midpoint pivot at 71.42, and to a D target of 67.15 which would be a seven-month low. These targets are active so long as 75.69 is not touched or exceeded to the upside. Traders attempting to buy the midpoint should be mindful of the prior low of 71.32 when positioning stops. ______ UPDATE (12:34 p.m. EST): Oil has rallied powerfully and negated our targets.
Crude looks bound for 76.13, a Hidden Pivot target that can be shorted with a stop-loss risking no more than 3-4 ticks. The gnarly pattern associated with this target looks like a winner to me, and that’s why I think we can get away with a stop-loss much tighter than the 21 (or so) cents this vehicle usually requires. If you are looking to catch a ride north, watch for camouflage opportunities on a pullback to around 74.36, the midpoint pivot associated with the rally target. _______ UPDATE: 75.69 is as high as the futures got on the last run-up. The target is still valid, though not quite as appealing, so I’ll recommend canceling the order.
A corrective blip precisely from the 74.52 midpoint of the bearish pattern shown suggests its sibling D target at 71.00 should evince an equally precise bounce. Accordingly, oil traders should bid 71.07 with a stop at 70.84. (Posted by Harry) _______ UPDATE: The futures sliced through the support on the way down, consolidating beneath it before heading still lower. The theoretical loss on a long initiated as suggested would have been $230.
Crude’s charts have been flagging for so long one might have forgotten that it’s in an uptrend. It is, though, and yesterday’s price action suggests it is not yet ready to break out for a run at $90, it’s next likely stop. If it were otherwise, the stab higher yesterday would have gone an extra two cents to exceed the external peak at 81.53 recorded on November 23. Pivoteers should note on the 60-minute chart that there are some small peaks near that one that could conceivably provide excellent camouflage for a long entry. FYI, you can try bottom-fishing the January contract at 77.79, stop 77. 70, day order. The relevant pattern is visible on the 5-minute chart. ______ UPDATE (77.20): The Hidden Pivot at 77.79 evinced no discernible support, so any attempt to bottom-fish there would have experienced a loss of around $90.
