An attempt to read the Crude charts.
The weekly chart below, I have marked with two Fibonacci retracements, the blue dashed lines are drawn from the January 2007 bottom to July 2008 top and the one in red dashed lines is more recent one from the January 2008 bottom to July 2008 top. First a look at the current price, its way down the value (MA’S) zone and needs to pull back or stall so that the MA,s can catch up with it. Secondly we can see that the price has retraced below 38.2% level of the move from Jan’07 to Jul’08. 50% retracement level at $98 is a good weekly support. It has also retraced below 61.8% level of the move from Jan’08 to Jul’08. There is a confluence of two fib lines at $110 which is likely to pose strong resistance or at least slow things down when crude reaches there (actually with crude one can never really tell when it slows or flies!!!). Above that we have MA’s converging near the $118, a logical target for a pullback. The MACD histogram below has traced a multi year low; suggestive of price going down in the near future, maybe a test of January lows of about $85?
The daily chart below is hinting about the pullback we were just discussing above. Here also the price is way below the value zone, the impulse bar has turned blue, time to cover shorts or tighten the stops on shorts. The MACD histogram has traced a bullish divergence, suggesting that the bears are loosing some steam. Crude can pullback to its value zone (the MA’s) at $110 or better still go up and test the multi year Uptrend line (now resistance) near about $115/117 which is once again as mentioned above is also our weekly resistance.
"The person who says it cannot be done should not interrupt the person who is doing it."
Chinese Proverb
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