Crude oil ready to produce another whiplash
News of production cuts sent crude oil prices to the top of their recent range, although the Elliott wave scenario we described two weeks ago had already been invalidated by last week's price action. With revised expectations in mind, today's post highlights some likely near-term trades and also examines the two most prominent big-picture scenarios.
In the very near term, we expect the market to fill the gap left by Friday's close at 75.67. Note that the leap took price slightly above the upper Bollinger band, which many in the market will interpret as a signal to fade.
After the gap fill, we'll watch for price to test the first support zone near 72.80 to 71.70. A deeper retracement to 68.16 is also possible, but one of the support zones will probably serve as the launch platform for a second rally that would reach even higher than the current price to test the zone near 82.79 to 83.46 and possibly the zone from 85.61 to 86.87.
In our main scenario (drawn and labelled in black) the second rally would complete wave 'iv' of a five-wave downward diagonal move, to be followed by a reversal to lows not tested recently.
The next best scenario considers price to have made a durable low on March 20. In that alternative view (drawn and labelled in blue) the upward move of the past two weeks would represent part of a developing upward impulse that would eventually carry the market well above last year's high. We probably wouldn't get confirmation of the alternative scenario until mid-summer though, as the overall pattern can remain ambiguous until price either succeeds or fails to break beneath last month's low. The market would view a confirmed higher low as very bullish.
Trading On The Mark uses technical analysis to identify the trends and turns in highly traded markets for commodities, energy, currency, bonds and indices. Consider subscribing to our daily or intraday services!