Monday, March 30, 2009

Crude Oil Drops

The ETF for oil (USO) fell 6.67% today which is very close to everyone's favorite and lucky number of 6.66%. Gotta love those three sixes especially when you are long this market!

As you can see in the above chart oil has had a nice move up since February so it's only natural and healthy to expect some kind of a pullback. USO has now pulled back to the .382 retracemet level which is one third of the February/March advance.

Oil continues to make higher highs and higher lows over the past 6 weeks. Will this low that has yet to be established also be a higher low? Nobody knows for sure but if the seasonal trend for oil continues moving higher, I would be looking for the current sell off to terminate somewhere between the .382 and .618 retracement levels.
A move below the March 11th low (last confirmed low) will turn the trend for oil back down.


Anonymous said...

USO looks like it performed a perfect fibonacci retracement of the Jan to mid-Feb move including the 1st wave to the 38%, 2nd wave to 50% and 3rd wave to 62%.

In addition, the daily stochastics and MACD seem to suggest a move lower is in order.

Finally, at the daily level, USO seems to continue to have lower highs failing to take out the January peak.

I am relatively new to TA, but this would appear to have a bearish meaning, which is almost the opposite of your view.

What am I missing?

Kevin said...

You're not missing anything. You are 100% corrrect, the major trend for oil is still down. I am looking for the trend to reverse. I've been long since the lows so my entry point carries little risk.


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