Sunday, March 20, 2016
CL Crude Oil Commitments of Traders COT and WTIC West Texas Intermediate Crude Oil Candlestick Charts
Everyone is on the oil band wagon celebrating the parabolic move in oil over the last five weeks. Pundits parade across computer and television screens daily proclaiming that oil will continue higher. They are probably on the right track at least for the next few weeks although there may be a stutter-step in the days ahead to close out March. The green circles show the significant bottoms in oil price and the red circles show the tops. What do you think will happen?
The big rally move in oil is parabolic with price back up through the 20-week MA at 36.15 and teasing towards the important 50-week MA at 45.37. The high last week is 42.49. Keystone's 80/20 rule says 8's usually lead to 2's so the breach of 38 hinted that 42 was on the come which occurs. 41.80 hints that 42.20 would occur and it did. The 42.80 level would be interesting since it would hint that 43.20 is coming.
For the WTIC weekly chart, the indicators are long and strong (green lines) suggesting higher highs in price going forward on the weekly basis. Not one of the indicators are negatively diverged so price has no reason to pull back, although considering the radical parabolic rally price needs a rest for the sake of taking a rest. A back kiss to the 20-day at 36 may be in the cards which will allow some backing and filling and then supply more juice for price to continue higher.
There is a meeting between OPEC and non-OPEC oil producers in Doha in April where a production freeze or other measures are expected, however, the long and strong behavior on the chart may be waning by then and set up for a drop; we will have to wait and see and check the chart in early and mid-April.
The WTIC daily chart is negatively diverged with the overbot RSI, overbot stochastics, money flow and MACD histogram. The MACD line on the daily is long and strong so oil will likely retreat for a day or two, then come back up for another high, likely a test of the 200-day MA at 42.85, then check the MACD line since it will likely be in negative divergence marking a near-term top in oil in the days ahead. Oil prices should then retreat in the daily time frame but price should become buoyant again in the weekly time frame as discussed above.
Thus, to simplify, oil should perform a jog move, say down to the 38-39 congestion for a day or two, then back up for a day or two to 42.80-43.20, then roll over to the downside for a several day or week or two retreat say down to 36-38 (the 20-week MA), then the rally will resume on the weekly basis and in early April oil will likely be at new highs say above 43 and moving higher.
Keystone highlighted the possie d with oil in February and the rally prediction which occurred. That was the USO and UCO trades announced a couple-three weeks ago or maybe a month ago. Keystone has taken profits and exited these trades and is not in oil right now. One potential oil play would be shorting oil once the MACD line on the daily goes neggie d which will likely be this week. It would be a very nimble and quick trade, however, to get a few percent of downside and then not stick around because of the bullish weekly chart.
Another potential play is to sit and wait say until the end of this month or early April when the negativity on the daily chart ends and is set up with possie d; this is likely the best play going long oil perhaps beginning a long oil position in the last couple days of March or beginning of April. The weekly chart above says there more room to move on the upside so higher highs should occur in the first or second week of April. The analysis can be updated as the days play out. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note: The COT chart is courtesy of COT Price Charts and is annotated by Keystone.