February Crude has been on a 'mechanical' buy signal since early December, when a pullback first touched the green line. The futures have since gone flat, dancing a jig a 'x' that suggests DaBoyz are in no hurry to let it loose. Geopolitical mayhem, including the targeting of tankers in the Suez, has had surprisingly little effect, and we hesitate to ascribe this to ordinary forces of supply and demand. But with China's economy weakening and the U.S. headed as always into recession, perhaps that is the explanation. Crazy world! In any event, the futures have pussyfooted at the green line for long enough that the buy signal, even if still theoretically valid, is no longer enticing. Look for quotes to fall below C=64.21 over the next eight to ten weeks, pulling gas prices down below $3 in most states.
Two conventional ABC patterns are driving crude higher to, respectively, 75.80 and 77.48. Both of these Hidden Pivot resistances are shown in the chart, with HP levels that should be tradable. That implies that a pullback to the green line from Friday's high at our sweet spot would trigger an appealing 'mechanical' buy. Also, a subsequent rally to the target could be shorted with a tightly constructed reverse pattern. The larger ABC has a midpoint resistance at 73.44, and an 'x' green line at 72.26 that also would be buyable. Bottom line: Expect Feb Crude to continue higher, with no dips below C=69.28, to at least 77.48.
Feb Crude came down hard after peaking last week 30 cents above a level where I'd suggested looking for a set-up to get short. There was no discussion of this in the chat room, so I have not established a tracking position. The nasty tumble is good news for motorists, since it implies that $3 gas will be with us for at least a little while longer, Here in Florida, and elsewhere in the U.S. (although surely not in California), there is a chance that the price of premium gas will fall below $3. Depending on how sellers handle the 70.34 midpoint support, the weakness could continue down to as low as D=64.49.
Last week's rally, which occurred almost entirely with a leap on Monday, brought the futures to within easy distance of testing my recommendation to short the green line (x=75.88) 'mechanically'. The textbook stop-loss would be just above the 'C' high at 79.57, implying nearly $15,000 of entry risk on four contracts. I will try to provide real-time guidance for this if there is strong interest in the chat room, but in any case we should be able to determine with a high degree of confidence whether the mini-bear market begun in late September from around 88 is over.
The downtrend's so-far failure to reach the 64.80 target could be a sign of incipient strength or even the start of a reversal of the mini-bear market that has cut oil's price by 23% since it topped in September at 88.21 a barrel. Regardless, the February contract would become a fetching 'mechanical' short at the green line (x=75.88), stop 79.58. If there's an expression of interest in the chat room at the appropriate time, I'll provide guidance for doing so with a 'camouflage' trigger.
If this so-far modest bounce is going to get legs, it should easily penetrate the 71.74 midpoint resistance of the reverse pattern shown by no later than Tuesday. A decisive move past it would make the futures an odds-on bet to achieve D=74.40. As always, an easy move through so clear and compelling a Hidden Pivot would imply that the uptrend is likely to continue. However, the rally will need to get past the pattern's 79.67 peak to suggest that a test of autumn's highs near 88 is coming. _______ UPDATE (Dec 13, 10:18 p.m.): Is this rally the start of an important trend change? If so, it will push past the 71.10 'D' target of this reverse pattern without much effort. Today's thrust was sufficient to trigger a theoretical buy and some profit taking later in the session, but it will take more than that to reverse hard selling that has persisted for the last ten weeks.
Crude teases prior highs and lows so relentlessly as to seem hellbent on tormenting everyone who trades it. I doubt the bear cycle begun from around 88 on October 20 will reach the 66.30 'D' target shown, but p2=69.56 certainly seems possible, given the small breach of p=72.93 two weeks ago. In any case, the next buying opportunity would likely come on a marginal breach of lows just to the left of Friday's close. The trigger interval would be $1.39, so check with me in the chat room for risk-limiting ideas before you take the plunge.
I'm ready to bury that earlier prediction of $117 a barrel, since the daily chart has evolved to provide no hint of it. Not that it couldn't happen. There is an ABCD pattern stretching back to 2021 that would allow for a move to above $115. The original forecast assumed that a growing conflagration in the Middle East would drive the price surge. However, it turns out that speculation, including by the U.S. military brass, that Israel would face a long, drawn-out war, turned out to have been based on Israeli disinformation. In fact, Hamas has trapped itself in a tunnel die-off, every shaft, entrance and exit of their supposed fortress having been mapped by Israel at the time they were created. As for Hezbollah opening up a new front to the north, they haven't, and one can only surmise that neither they nor their paymasters in Iran want to cause the total destruction of Lebanon -- or of Iran's nascent A-bomb capability, since a couple of bunker buster boms such as Israel used on Gaza City could end the weapons program in a trice. Returning to January Crude's chart, it is a mess of dueling impulse legs that are tradeable, but only with diligent attention to the intraday bars. At the moment, the chart is neither bullish nor bearish, nor are there any price targets of interest that I can discern.
December crude's month-long fall did sufficient damage to the longer-term charts to require a rally above $83 to undo it. However, we'll focus on the short-term picture to determine whether the bounce last Thursday from 72.16 is likely to show staying power. Steep as it was, it still fell a tad shy of the 76.62 target of the modest reverse pattern shown. Achieving it would still leave the futures two cents shy of generating an impulse leg with a leap above the external peak at 78.63 made last week on the way down. We'll delay judgment until we've seen how buyers handle both resistances.
We ended the week with a nice score in crude futures that is detailed in the chat room. Check out Friday's discussion thread to determine whether you could have followed my simple, explicit instructions to reap a gain of at least $1070. It came by way of a day trade initiated in the early afternoon. This gambit went against the trend, leveraging a presumably minor breakout that died almost precisely at the p2 secondary target of our bullish pattern. So what's next? The selloff from just beneath June's $94 top comes as a surprise, since my recent forecasts have called for a run-up to at least $117. That's still possible, and the target will remain theoretically viable in any case unless the December contract plummets below $63. But the inability of DaBoyz to manipulate the price above the June high diminishes the likelihood of a blowoff. It's possible the 92.48 peak in late September was a terminal move, but the rally could still re-ignite if the Israel/Iran war escalates sufficiently to curtail global energy supplies. _______ UPDATE (Nov 10): Crude got savaged last week as sellers pushed the December contract beneath two important lows -- one internal the other external -- without an upward correction. This generated a strong impulse leg that will require an even more powerful upthrust exceeding 83.60 to undo the damage.
