|It's hard to believe the prices of oil and gold these days. To help determine how much farther oil prices might climb, I drew a pitchfork chart (Figure 1). This is another way of showing support and resistance lines. This is an interesting case, as it is rare to see a "super bull move" like this on a pitchfork chart.|
This is where a move off the lower median line makes its way toward the upper median line. More often than not, the move usually stops or is repelled at the median (center) line.
|I expect this move to top out very near this upper median line — say, close to $93, after which a corrective move can be surmised down to the center median line near the current level of $77. This move could also come lower to test the 50-period exponential moving average (EMA), currently at $71.32. Beyond that, the big picture is that as far as this pitchfork chart is concerned, the uptrend stays intact as long as the lower median line is not violated with a close below it, currently near $60. That is fine for long-term investors, but traders will likely take profits if not completely reverse course and possibly short this high-flying market.|
|FIGURE 1: $WTIC, WEEKLY. This chart suggests this monster move for oil may finally be topping out.|
|Graphic provided by: StockCharts.com.|
|As expected, the displayed indicators reflect a very strong trend. The average directional movement index (ADX) is sloping upward well past the 20 level, the MACD (moving average convergence/divergence) shows strength well past the zero-line, and the relative strength index (RSI) showing similar strength above its 50 level.|
However, cautionary signals are surmised from toppy levels above 70 on the RSI and the stochastic oscillator is in overbought levels above 80. In a strong trending market the stochastic oscillator can "stick high" for an extended period.
|In summary, I believe this move is topping out and a corrective down leg will likely ensue with support targets of the median line near $77 and the 50-day EMA currently $71.|
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