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Technical analysis for oil: Harmonically, Gartley is underway!
Written by article default Friday, 24 September 2010 09:08
This week, we will have a look at crude oil from a pure harmonic point of view. So, let us start the technical journey from 83.00 –high recorded on August 08- where oil slipped sharply towards 70.75, creating the first harmonic wave or rather the first leg.The following inclines from this point to 78.00 zones have been limited ideally at 61.8% Fibonacci of XA leg, creating AB leg.
BC leg interpreted the declines from 78.00 to 73.50 zones as seen on the provided daily chart.
Therefore, the support that oil has found around the lower line of bullish channel should be seen as the first positive indication of retesting 61.8% Fibonacci of XA leg once more.
Dear reader, open your own chart and use Fibonacci retracement tools from 83.00 to 70.75 and you will be surprised as 73.50 levels didn’t touch the support line of the bullish channel only but it also meets 23.6% for the downside wave from 83.00 to 70.75.
Actually, we have just caught some technical factors that assist us to predicate a bullish wave from the current levels:
1. Stochastic indicator overlapped positively inside oversold areas.
2. CCI 14 indicator is definitely positive.
3. Yesterday's bullish candlestick formation which bottomed at the support line of the channel.
4. The bullish channel itself is a positive indication, even if it is currently treated as a correctional channel.
Let us move to the harmonic probabilities of this proposed harmonic structure as 61.8% correction for XA leg offers two possibilities as follows:
* "Butterfly pattern" with potential reversal zones or "D" targets at 127% of XA.
* "Gartley pattern" with potential reversal zones or "D" targets at 78.6% of XA.
We choose the Gartley pattern for two reasons:
1. Fibonacci projection level of 161.8% of BC leg meets 78.6% of XA ideally at 81.00 levels, which represent our awaited target for the coming period and both 161.8% and 78.6% meet the resistance line of the price channel.
2. This is the nearest target and if the scenario is respected as well, we can watch the price behaviors there to pinpoint the next targets.
Don't forget that the level of $78.00 per barrel should be breached via four-hour candlestick closing at least to confirm this harmonic formation.