Members login
Technical oil: Range trading and 80.35 is the key
Written by article default Friday, 29 October 2010 06:33
Since placing the top at 84.40 in the first week of October, oil has been trapped within a range trading area, where its floor resides at 80.35 levels as seen on the provided daily chart.Let us start this technical story, looking at the chart from a harmonic point of view as we were capable of catching a bearish harmonic AB=CD pattern, which started on August 25 at 70.75 areas.
The BC leg represented the correction of 61.8% Fibonacci for AB, whilst crude retraced back sharply from 261.8% and this is the first technical factor that should be considerably noted.
The second technical factor is the time as CD leg took a longer time than AB, suggesting that we are facing a case of AB=CD extension.
The third technical factor is the effect of the AB=CD extension as it usually causes a sharp reversal.
Therefore, we believe that crude's price will move downwards over short term basis, targeting 61.8% Fibonacci of the CD leg at 77.70 but the key support level of 80.35, which also represents 38.2% Fibonacci of CD leg, should be breached decisively.
Stochastic shows an obvious negative overlapping sign, supporting the bearish scenario.