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TECHNICAL ANALYSIS


Nuclear Reaction

03/16/11 08:14:47 AM
by Austin Passamonte

Here's the midterm price forecast for crude oil futures and related markets.

Security:   CL
Position:   N/A

At the time of this writing, world events have pressured crude oil futures in both directions. A rise from the $87 area swing lows to $106 swing highs was completed in about one month's time. That was followed by the tragic natural disaster that struck Japan on several fronts.

FIGURE 1: CRUDE OIL, DAILY
Graphic provided by: NinjaTrader.
 
Measuring the price swing from mid-February lows through early March highs with a retracement grid shows current resting price at the $99.50 area of the 38% level. If this pullback from peak swing to present is nothing more than a normal pause before a strong continuation, that 38% zone should hold fast without much further decline. A pullback to the deeper levels should find footing around the 62% zone before pushing higher. A drop back to the 78% zone near $92 and range-bound price would then be expected for a while. See Figure 1.

FIGURE 2: CRUDE OIL, WEEKLY
Graphic provided by: NinjaTrader.
 
Widening our perspective to the weekly chart view (Figure 2) shows a bigger range grid to measure price. From recent historical lows near $62 (adjusted for rollover contract values) in early 2009 to the current highs near $107 shows long-term trend support near the $90 level of 38%.

For the past two calendar years, $80, $85, and then $90 have been the magnetic values where weekly highs, lows, and closes have mostly clustered. The rapid extension off the $90-zone, which resulted in three green candles higher, resemble the May-June 2010 period, going the opposite direction with three red candles lower. It is entirely possible for crude oil (CL) to retrace much, most of, or the entire leg upward back to solid supports of the $92 to $90 levels. Holding at/above those critical levels will be key going forward.

Crude oil pricing is complex. It is the only market that is valued as a quasicurrency and a lifeline commodity market in equal measures. Cross currents of global supply/demand or lack thereof battle US dollar valuations. One thing we can be sure of above all else: tune out the general media and forecasts of what might happen and tune into price action on your charts from the market's opinion itself for the real truth at any moment in time.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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