Tuesday 8 December 2009
We have been bullish on Crude Oil for a few months now, but price has been
declining for several weeks. This is true, but the trend remains up. Even though
we remain positive on Crude Oil, the standing orders have been to wait for an
opportunity, Crude Oil – A Message From The Market. As will be seen on the
two charts included in this article, price is at an important juncture, and an
opportunity could exist.
On 17 September, Crude Oil made a swing high at 74.80. Previous resistance
acts as support, once price rallies above it. A horizontal line has been drawn
across that swing high to show where it may now become support. Additionally,
from the late September low to the October high, a 50% retracement line has
been added, just above at 75.00. That makes two independent potential
support at the same price location.
You can see that the Dubai debt scare from two weeks ago penetrated that
support in a price shakeout. Note how low the volume was, holiday or not. It
says there was not a lot of selling. Price is now retesting that low. There is also
a support trendline just below. This shows the trend being up from the Feb 09
and Sep 09 lows. Another added aspect is the fact that the rally from late
September took 18 trading days to reach the October high. The current
correction is now 33 trading days old, and has only been able to retrace to the
half-way point. This is a measure of strength in an uptrend when the 50% are
holds a correction. It is taking almost twice as long in time to produce just half
an effort.
Despite the length of time the market has been correcting, there is no real
technical damage to the trend. As we indicated on a weekly chart that had a
clustering of closes, the inability to close lower says the downside pressure is
not very strong, Crude – Cruising On Cluster Closes.
A look at the 60 minute chart shows some more.
The slanting down is drawn across the highs. This shows resistance, and it also
tells us that the hourly trend is down, within the larger daily time frame. We
address the importance of knowing the trend within the time frame you are
trading in an article on our website, http://www.edgetraderplus.com/, under Free
Articles, “How To Trade Successfully In any Market.”
The second slanting line, under the lows, is a reverse trend line. This indicates
when price is in an oversold condition, and that is where Crude Oil was today.
We took a long position in the first hour, when price was showing signs of
holding, but the remainder of the day was spent in a sideways trading range,
and the hourly trend still points down. For that reason, we chose not to stay
with the position. The fact that we knew the trend of the time frame for making
a trade made the decision not to stay with it a no brainer. It was a low risk
attempt, and we expect another one will surface soon.
The trading range also told us that price was not moving away from support.
This means the lower value is being accepted, and likely needs to go lower to
find support. Going lower could be a quick move down, followed by an
immediate rally, and it could occur during the evening hours. Whenever it
occurs, it will show up in the hourly chart, and will be identified as another
buying opportunity. This should provide excellent trade location for a recovery
rally of some degree.
