DanV
Long

OIL - CLOSE TO FORMING SIGNIFICANT LOW

FX:USOIL   Crude Oil (WTI)
My last oil             chart posted some 10 months ago anticipated a drop to 35 area in 5 wave decline from Aug 2013 high (chart link below). That has been met and some.

Some details have changed from last chart but not in the way that would make significant difference, therefore, I will not repeat the thinking behind my analysis, but rather focus on what I think appears to be clearer and will help in trading planning.

Media and commentators are now coming up with some extreme targets and based on some fundamentals, USD strength and geopolitical developments. Therefore, I suspect that the price action could frustrated both the Bulls and Bears before clearer directional move develops.

Here is the summary of observation from the chart:
1. The decline from 2008 high is evidently in 3 swings even though it looks very impulsive and dramatic.
2. The rally back up from the low in Jan 2009 to May 2011 is also in 3 swings retracing just over 61.8%.
3. Subsequent decline from May 2011 is also in 3 swings, a, b, c which is 5 wave from Aug 2013 still in progress but could be close to completion, ie it is in final stage, wave "v" of 5.
4. Wave "v" of 5 so far appears to be forming and ending diagonal ( falling wedge ) though not yet confirmed.
5. The drop so far since May 2011 has reached approx 75% of the price and historically in 1990 and drop in 2008 both terminated at 75% & 77% (approx) respectively (see chart below)
6. If the above observations hold and in particular we have final wave "v" of 5 as ending diagonal , then the low could form between 25 - 27 or little lower but doubt it will hit 20 which is widely expected in the media.
7. Low in this region would make a total retracement of 88.6% of the move from 1998 low to 2008 high and is in proximity of other Fib projections.

Beyond that, since the price action has breach the 2009 low, the idea outlined previously of potential triangle is no longer in play. Instead what we might have (not confirmed) is a leading diagonal which has 5 waves consisting of 3 swings each, ie 3-3-3-3-3. OR some other combinations. Regardless then anticipated rally will be limited to 60 -70 zone before further weakness develops.

Under this scenario the 2008 high would not be surpassed for many year to come. May be even decade or more to come. However in the meantime the anticipated low will allow longer term bullish trade to be considered directly on Oil             or shorting the companies whose energy bills             form significant part of operating cost such as airlines and transport.

As always, do your own analysis for your trade requirement. Select to follow me and the chart for notification of future updates. If you like the analysis then please indicate this by thumbs up, constructive comments and sharing with others. If you have an alternative idea then please share for all to learn from.

Thank you for taking the time to read my analysis.

DanV
danv-charting.com
http://www.danv-charting.com
https://www.youtube.com/channel/UChJVIJir7nymD9J3ZWoal-w/feed
https://www.tradingview.com/chat/#E4bnOJSWcO1zDjBG
it seems a few of us are working on Crude today :-)
Macro Outlook : Crude Oil vs Fed Funds Rate
Reply
DanV MOD Realisto_FX
Heheheh, yes indeed.

Thanks for sharing your chart. It looks very interesting. I had not looked at that combination before. Nice.
Reply
Chart showing historical retracements referred to above.
snapshot
Reply
great, thanks.
Reply
DanV MOD diamondekk
Thank you.
Reply
Amazing work Dan!

Do you have a timeline for the completion of this bottom? Around June?

Also, are you implying the (iv) of 5 will complete in about a month @ around $38?

Your counts makes a lot of sense when viewed combined with the overall market. SPX is temporarily oversold and it's due for a small bounce. The crash of oil to $25 could really create some panic for the entire market.

Reply
DanV MOD coolingla
Thanks for the compliment.

Based on seasonality, http://charts.equityclock.com/crude-oil-futures-cl-seasonal-chart it seems significant bottom could be in February give and take month of so.

Based on some time symmetry on chart above we could see low in February at the earliest or cycle could stretch to April - May, but this is often most difficult to to be accurate. So it is only an estimate. However if you also combine that with the fact that we are just about completing wave iii of 5 and that wave iv and v are still due (assuming we get ending diagonal which is at present not confirmed) then at least few weeks for wave iv and little longer for wave v could mean that we would probably see low around April - May.

Regarding bounce on wave iv, it is hard to show this by labels or an outline exact path but again it it turns out to be an ending diagonal we would be limited to the upside. So my estimate is probably 35 - 38.

So as we progress and monitor the price action we should be able to narrow down both the actual time window and price target. How all of this will tie in with the SPX is puzzling as I think that we have limited upside if the major top is not already in place. So SPX could well decline of the next 12 months or so significantly but Oil could continue to bounce during that time. Similarly, beside oil being oversold over significant period, USD might have topped or go into extended sideways congestion, which might make it easier for oil and other USD denominated assets to experience at least relief rally.

Hope this helps.
snapshot
+1 Reply
Dan,

Also, could it be that your (i) of 5 is actually (iii) already and your (iii) is (iv)? Which means the bottom is already in?

I say this because your (i) produced the sharpest decline and greatest divergence, consistent with the behavior of a 3rd wave drop. Your thought?

Thanks in advance.
Reply
DanV MOD coolingla
No, I don't think so, if you look it is in 3 swing on smaller time frame. and all subsequent waves are also, which is one of the feature of ending diagonal of 3-3-3-3-3 formation. In this wave 1 is always longest and possibly the sharpest as all subsequent waves are smaller ans slower as it gets exhausted.
Reply
danv u mean it cannot be a diagonal y?
Reply
JalRad JalRad
i mean why it cannot make ending diagonal
Reply
No, I am suggesting that the final wave 5 is ending diagonal. However as this one appears to be of the 3-3-3-3-3 formation we need wave iii to form low in this case for confirmation that it is ending diagonal. If the price accelerate to the downside then we might not have ending diagonal. So what I mean is it is not yet confirmed till be make bounce for wave iv of 5.
Reply
Thanks for the reply Dan! You are truly an expert on EW!
Reply
Dan,

Do you think (iii) at $27.50 are pretty much confirmed now? If so, (iv) completes around 2/15 seems to be about right, right?

Then (v) around 3/15 to 4/15?
Reply
DanV MOD coolingla
@coolingla - Yes wave iii is complete and progressing in wave iv. not sure about the actual date for completion of waves iv and v but you could be right.
Reply
Looks like (iv) is forming an expanding diagonal?
Reply
yes yes and yes! looking to buy oil for various long term support levels...
Reply
DanV MOD dionvuletich
Excellent, sounds like a plan. :)
+1 Reply
Great work Dan! looks like a very promising long once the bottom is in :)
Reply
Thanks.

Yes indeed. Give us plenty of time to plan how we might play this.
Reply
I am giving it a shot here already. Because of the topping I see in USDCAD, I must admit a higher high for the DXY would even be better. We would get a bearish divergence then, but the market sometimes doesn't give these unique possibilities for free.... Therefor my first SHOT.

This is the megaphone pattern I'm trading at the moment. So far it didn't put me down.
snapshot

If we break this megaphone down, things will get ugly. The monthly channel could be next stop and that matches your 22.
snapshot


At the moment I trade what I see and the monthly MACD-histogram shows me the big damage to the bulls is done already. The histogram is turning up, a gold cross followed by it would be awesome.
Reply
DanV MOD Yahia.Awes
Thank you for sharing your charts and comments.

I agree with your observations on USDCAD and histogram divergence on oil. I anticipate a bounce before final drive to form the low in oil which is not possible to see in monthly chart, so the MACD divergence will continue to play out till price action confirms it to the upside.
+1 Reply
The bounce we are talking about could be a medium one, to test some real resistances. But one thing we agree, the end of falling oil prices is near. Cheers to those who shorted oil since 100.... I can only wish that I was one of them :D
Reply
DanV MOD Yahia.Awes
I agree. Well we have the possibility of now capturing some of the eventual reversal.
+1 Reply
This was my USDCAD, based upon that I had a short since 49.
USDCAD buy end of the week or begin next week.


The short can be found here.
Euphoria on it


Combined those two together we have a clear co-relation :) which makes me analyse them in pairs for such moves.
Reply
DanV MOD Yahia.Awes
Excellent. Well done. :)
+1 Reply
Thank you learned the hard way ;)..
Reply
Hi Dan, thank you so much for your efforts. without patience i always wait your next analysis. so as i understood we are making a bottom for crude oil. These days i also follow SP500 and DOW, considering the recent prices what do you expect in 2016 for SP500? have a nice day.
Reply
DanV MOD kemal.erdog
I think we have a major top in place for all Indices and a significant correction as commenced that could last for quite some time. I published the chart below which though turned out to be little too early in time due to the effect of extended QE and delayed rise in interest rate, in terms of price, I think it still holds. So I would not be surprised to see bearish cycle commence on all major stock indices.
SP500 Bearish Outlook - Close to forming Generational Top
Reply
Thank you very much Mr. Dan for the in-depth Analysis, i consider your charts as a great source of knowledge and education. Great effort as always.
Reply
DanV MOD AmrRayan
Thank you for the compliment. It is always a pleasure and joy to share when it is appreciated.
+1 Reply
UPDATE - Possible low for oil could be in which appears to be supported by the following:
The US Oil & UK Oil correlation chart is interesting. They broadly move in sync, but at important points one of them gives an early signal by few days to weeks, as seen with my notes highlighted this on this monthly chart. UK Oul made spikle low in Jan and US Oil made new low In Feb suggesting divergence and potential turning point
snapshot


Similarly the UK oil appears to have completed falling wedge made up of entire decline as seen in this chart with other technicals lining up too and RSI is coiling which could break to the upside
snapshot


The we have this coincide by record short position by Hedge Fund Managers Chart link from Bloomberg - http://assets.bwbx.io/images/i69Z9Dh2xtRc/v4/-1x-1.png

Finally the falling wedge on US Oil we noted on the original chart above also appear now complete and whilst it is safe to look for confirmation, taking in all of this together and the along with time symmetry suggesting possible low in February and Seasonal pattern supporting low around this part of the year, I am conclude that the significant low is formed and that we will not be seeing price anywhere near 20 in this cycle.
snapshot
+2 Reply
Hi DanV, Thanks for (all of) your analysis. I notice this (unclosed) gap around $22 on 2002-03-05 in the daily and weekly charts. What's your opinion on that with regard to bottom formation and EW?
Reply
Thank you for your appreciation and question.

I see that gap, not particularity big one but it is there. These gap are not rare unless very significant ones and in close proximity, not sure if they all necessarily get filled. If however it does then it mean I have misinterpreted the wave counts somewhere. So I would not completely rule this out just yet. Either way a confirmation would help. So far it seem on Hourly that we have possible minor 5 wave impulse move up and are retracing this in abc zigzag. If this holds then we will see strong move up forming new HH in due course.
Reply
Thank you. I double checked this gap on Avatrade charts and it did get filled there. So maybe it is a TV glitch.
Reply
Ahh OK, thanks for that.

There are times when different data vendors might have different prices unless we a look at official Futures contract. Even then on occasions a gap might occur in Futures contract but not in cash market.

Regardless will be very interesting to see how this develops.
Reply
It seems that the low we were anticipating is in and a retracement 33 - 32 range might hold in order to form a higher low as it develops new uptrend
snapshot
Reply
Do you have any targets to the upside?
Reply
Thanks for your question.

Probably in the region of $60 - $70, but not it the straight line. We have possible Bounce in dxy which would suggest a retracement in the oil could follow before continuing to the upside.
+1 Reply
I am having trouble putting vague labels if a follow retracement is to come.
snapshot
Reply
That is probably because the wave counts are not clear. Quite possibly it is not 1 -5 wave impulsive move of the low. Rather sets of double zigzags with each also exhibiting minor zigzags. Or if your wave counts from 1 -5 are correct then possibly it is and abc with wave c forming potential ending diagonal. It has probably formed a top or could push into 45 - 46 zone before retracing as shown in my charts. The earlier pullback suggested did not materialise deep enough and that correction still lies ahead I think. Hope this helps.
snapshot
+2 Reply
Ideas Scripts Chart
United States
United Kingdom
India
España
France
Italia
Brasil
Россия
Türkiye
日本
한국
Home Stock Screener Forex Signal Finder Economic Calendar How It Works Chart Features House Rules Moderators For the WEB Widgets Stock Charting Library Priority Support Feature Request Blog & News FAQ Help & Wiki Twitter
Private Messages Chat Ideas Published Followers Following Priority Support Public Profile Profile Settings Account and Billing Sign Out