Oil dead cat bounce continues but will be short lived.
Oil is in a bear market and will eventually go back down to $28 a barrel. What we see now is a dead cat bounce that has done better than expected. However, I think it's coming to an end sooner or later. I will first start by identifying key levels. I identified four horizontal lines that solidified through the last decade. These are the $80, $70, $63, and $45 levels. Then we have our Consensio moving averages (15-day, 50-day, and 200-day). I tried fitting a Fibonacci retracement but my attempts failed.
So now we see a small rally that impressively crossed the 50-day MA after staying below it for 3 months. Both the daily and the weekly closed above it. So how long do we expect to stay above it?
Well the smaller the area we get squeezed in, the quicker we will fall back below it. The first hurdle to pass is the $63 resistance below which we are currently sitting. TD sequential tells us on daily and weekly timescales that we have momentum to cross above it since we see a green 2 trading above a green 1 and a green 3 above a green 2. Also last week's candle gave us a bullish pin bar. So we have two cases:
Case 1: If we do NOT close above $63 on the weekly, then we will quickly be squeezed between it and the quickly-closing-in 50-day MA. Once we're squeezed, we expect a break to the downside but we need to re-evaluate the probabilities then.
Case 2: If we close above $63 on the weekly then the next resistance is the $70 level and the 200-day MA. These two combined are formidable resistance and I give less than 20% chance that price will break through them in this bear market before establishing a bottom. Now if we trade between $63 and $70, then we will be squeezed between the 50-day and 200-day MAs, and we are more confident that the squeeze will lead to a breakdown that takes us down to $45.
We favor case 2 because it gives a clearer sign and stronger momentum for bearish action. It's also favorable if you want to trade this as a swing.
We will continue watching TD sequential count on the daily and the moving averages.
So now we see a small rally that impressively crossed the 50-day MA after staying below it for 3 months. Both the daily and the weekly closed above it. So how long do we expect to stay above it?
Well the smaller the area we get squeezed in, the quicker we will fall back below it. The first hurdle to pass is the $63 resistance below which we are currently sitting. TD sequential tells us on daily and weekly timescales that we have momentum to cross above it since we see a green 2 trading above a green 1 and a green 3 above a green 2. Also last week's candle gave us a bullish pin bar. So we have two cases:
Case 1: If we do NOT close above $63 on the weekly, then we will quickly be squeezed between it and the quickly-closing-in 50-day MA. Once we're squeezed, we expect a break to the downside but we need to re-evaluate the probabilities then.
Case 2: If we close above $63 on the weekly then the next resistance is the $70 level and the 200-day MA. These two combined are formidable resistance and I give less than 20% chance that price will break through them in this bear market before establishing a bottom. Now if we trade between $63 and $70, then we will be squeezed between the 50-day and 200-day MAs, and we are more confident that the squeeze will lead to a breakdown that takes us down to $45.
We favor case 2 because it gives a clearer sign and stronger momentum for bearish action. It's also favorable if you want to trade this as a swing.
We will continue watching TD sequential count on the daily and the moving averages.
Comment:
Weekly chart
Comment:
Oil is even weaker that I thought seeing that the $63 resistance level strongly rejected it. But the good news is that we are meeting a golden cross in two days on 24 January and price might rally again off of that with enough momentum this time to break the $63 resistance. If that happens then it's highly probable that the stronger resistance above that at $70 and the 200-day MA will reject the price.
Let us hope that price doesn't get squeezed between $63 and the 50-day MA, because that makes prediction a bit harder.
Let us hope that price doesn't get squeezed between $63 and the 50-day MA, because that makes prediction a bit harder.
Comment:
Oil has finally shown the bullish sign I've been waiting for by closing above $63 resistance. The resistance ahead is too strong for this kind of momentum to break through it though. So I expect a reversal at $70 to $72 at the shown resistance line together with the 200-day moving average.
Oil has finally shown the bullish sign I've been waiting for by closing above $63 resistance. The resistance ahead is too strong for this kind of momentum to break through it though. So I expect a reversal at $70 to $72 at the shown resistance line together with the 200-day moving average.
Comment:
On top of the two mentioned resistances, the TD sell setup will complete on 22 February and it will give a countdown 13 two days from now and a combo 13 seems probable too. All these resistances will act out.
Comment:
Another bullish move this time starting from a higher low. Starting from this baseline gives more probability that the momentum is enough to reach the 200-day moving average. It is very tricky to call the top, so one could short right now to be safe with a stop loss just above $70, or wait for reversal off of $70 and then short on the way down with the same stop loss. In both cases I see very low probability for this bullish move to break above the 200-day MA without at least one more pull back.
Another bullish move this time starting from a higher low. Starting from this baseline gives more probability that the momentum is enough to reach the 200-day moving average. It is very tricky to call the top, so one could short right now to be safe with a stop loss just above $70, or wait for reversal off of $70 and then short on the way down with the same stop loss. In both cases I see very low probability for this bullish move to break above the 200-day MA without at least one more pull back.
