Crude Oil: Poised For Now

Technicals | Dec 09 2021

Bottom Line 8/12/21

Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Up
Support Levels: $60.47 / $55.26 (Jan 2022 Contract)
Resistance Levels: $76.30 (?) /$100.00 / $141.00

[All prices WTI futures US$/bbl]
 

Technical Discussion

Reasons to remain bullish longer-term:
→ oversupply a major issue in the past yet this has rebalanced in a post-Covid-19 environment
→ bounce off capitulation low in April 2020 has stayed robust to this point
→ Oil price wars between major country producers always remain in play
→ Elliott Wave count remains on track for higher levels looking ahead

Crude Oil’s highest open interest (O.I) is now with the January 2022 contract. In our last review about a month ago we were continuing to advocate that a Wave-5 was in motion, and it was a matter of observing to see just how far it was going to take price before finally completing the intermediate 5-wave cycle off the April 2020 lows. In our view, it now looks as though that 5-wave cycle has completed.

So with this, we are going to lock in a higher degree Wave-(1) or (A) high. The count continues to back our longer-term bullish analysis, which means post this immediate dip completing, another large multi-month move north will trigger. If the recent high achieved circa $84.81 is a Wave-(1), then we would normally expect the higher degree Wave-(2) to be substantially deeper than what we have recently witnessed. With these waves frequently unfolding as larger zig-zag type patterns.

On the flip side, if the recent high is a Wave-(A) completion, then it will be more than typical for the Wave-(B) to unfold as a more shallow flatter type of pattern or even some form of triangle. So even though some further coiling will be likely from here, there is certainly potential for the recent low circa $62.43 to become a major low point. We need more time to assess all this of course, yet certainly worth taking a mental note of. Both labelings are longer-term bullish, with the latter post-trigger targeting an equally move towards $140.00 which is also where some major resistance resides. $100.00 resistance will be the first port of call though. One for the watchlist that’s for sure.

Trading Strategy

No trade here at the moment yet if price actions coils from here as per our Wave-(B) scenario, then over the coming weeks a low-risk trading setup is likely to evolve which we will be very interested in offering up a formal recommendation on. Patience until then.

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