WTIC Light Crude Oil Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation

West Texas Intermediate Crude Oil is topping-out on the weekly chart. Oil is black gold, Texas tea, that made Jed Clampett a rich man. The overbot conditions, rising wedge, universal negative divergence across all chart indicators, upper band violation (not shown) and Aroon at maximum possible bullishness say the top is in. The stochastics and RSI have a touch more thrust but nothing is expected to come of it; the action may extend the top a few days.

The rising wedge is ominous because the collapses from this pattern can be quite dramatic. A drop to 35-40 for the weeks ahead is easily doable out of a rising wedge. Readers exclaim, "Sacrebleu!" The entirety of Wall Street laugh at any indication of a top in oil. Haven't you heard that oil will go up for years ahead as the worlds economy recovers and inflation rises. Didn't you get the memo? The chart is the chart and it says Wall Street is wrong about oil. It will roll over any time.

The standard deviation bands are not shown since the chart would have turned into a bowl of spaghetti but price has violated the upper band at 71 so the middle band at 62.69, which is also the 20-wk MA, and the lower band at 54.34, are on the table. The bands are coming in tighter so a move should be squeezed out going forward and the chart says down.

The red circle on the left for the volume candlesticks show a robust upside week, the Fed wine was flowing like water and stocks climb higher. Fast forward a month and the wine is still flowing, and price prints a new record high for the rally, but the volume is lower. If price is to breakout higher, the volume should be stronger in the second red circle not weaker. This sets up a test for that candlestick to see what the story is on volume. It is hard to pick off but it looks like the 64-68 range is where that first red circle volume candlestick occurs. So that would be a first stop and if selling volume exceeds that previous volume, the big drop is likely at hand. Oil bulls need the volume to be strong to show that dip buyers are coming in if/when price comes down to the mid 60's.

The Aroon shows maximum bullishness in the oil trade right now with the bulls bullish and the bears bullish. If you have 100 oil traders in the same room, all 100 would say that oil prices will keep going up and up.

The ADX pink box on the left verifies that the collapse in oil as the COVID-19 pandemic hit. Price was in a strong trend lower but that petered out last summer. The oil bulls were then off to the races and the ADX went into a strong trend again, this time for the rally, in February 2021, and that strong trend remains with the ADX at 34. It is the only positive thing on the chart and the ADX always lags so the expectation is that it rolls over lower probably dropping out of the pink box on the right over the next month.

The drop in oil will be a several-week slump but price will come up again. If you bring up the WTIC monthly chart, you see the price making new highs and so is the RSI, MACD, histogram and money flow. It is one big oil party on the monthly basis. If you bring up the WTIC daily chart, it makes a new high but the indicators are in negative divergence so they are in bed with the weekly chart and want to see a several-week slump.

Thus, mixing the time frames together, technical trading is like playing 3-dimensional chess, the daily and weekly say down but the monthly says back up. So oil prices will roll over from here on the weekly basis, for a few weeks, say 2 to 5 weeks, but then recover and come up to print matching and higher highs in, say, late July or August.

Since the monthly chart remains strong, the downside damage expected from a rising wedge pattern on the weekly may be slightly diminished. Choose your poison on how you want to trade this scenario. Keystone does not hold any positions in oil currently. Individual positions are all short the stock market. Keybot the Quant algorithm remains long the stock market. Midnight Oil is always a buy. WTIC begins the week at 71.53 on this Monday morning. 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 Added Saturday Morning, 6/19/21: WTIC oil pops to a 72 handle a day after the chart above then drops now sitting at 71.29 not doing much as the rest of the commodity complex collapses. US Dollar 92.32. Euro 1.186. Gold 1763. Bitcoin 35864. Commodities collapse the most in a decade. Grains, metals, sugar and lumber wipe out the gains on the year.