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Technical oil: This time, it is an extended bearish harmonic AB=CD pattern
Written by article default Friday, 08 October 2010 09:45
In our last report, we could have been able to catch a harmonic Gartley pattern over daily basis and crude succeeded in reaching its suggested PRZ –potential reversal zone- easily.
This time, we will depend on the same analytical harmonic school, where oil has been able to form a completed bearish harmonic AB=CD pattern.
The pattern started on August 25 at 70.75 zones and was dominated by perfect Fibonacci symmetry, where BC leg interpreted 61.8% Fibonacci of AB leg as seen on the provided daily chart. Thus, we believe that it is an extended bearish harmonic pattern as yesterday's sharp reversal occurred around 261.8% Fibonacci projection of the BC leg.
This reversal sent crude very fast towards 38.2% Fibonacci of the CD leg at 80.35, where the first technical objective of this pattern resides.
Now, we believe that oil is preparing to reach the second technical target of this harmonic structure at 61.8% Fibonacci of the CD leg at 77.70, supported by the bearish candlestick formation drawn yesterday and the overbought sign on Stochastic.
Coming above 83.00 zones could delay the expected bearishness but it will not negate it.