Friday, May 01, 2009

Crude Oil Confirms Inverse H&S Pattern

Yesterday I wrote about the inverse head and shoulders pattern that is taking place in the oil market and today we saw USO rally over 3% closing above the neckline. I would like to have seen volume a little heavier today but volume did increase slightly when compared to the last few days which is a good sign for the bulls.

If this pattern is successful and oil does indeed rally, I'm looking for an upside target of $43. That's about a $13 rally from current levels... not a bad move. Let's see what happens.


Anonymous said...

I am seeing a very different pattern in $WTIC, the actual crude oil chart:
It is important to keep in mind that USO is a derivative which may not track crude's movements accurately. $WTIC has consistently outperformed USO because of contango.

Kevin said...

I am aware of that but if you look at the actual crude oil chart, that chart looks bullish as well. $WTIC has just tested support of its 50 day moving average and appears to me moving higher.

hkc said...

Can crude oil go up with S&P going down?

Jeff said...


I notice that you've used both volume and "on balance volume" on different chart analyses. Can you tell me when you might use one vs. the other? And I just want to say that I think your posts are excellent and very helpful Thanks very much.


Kevin said...

Hi Hkc,

Yes oil can go up with the S&P going down. These two markets aren't always positively correlated although lately they have been trading together.

Kevin said...

Hi Jeff,

OBV isn't a reliable indicator on its own which is why I only use it in combination with other tools. In this example I used OBV to confirm the inverse H&S pattern.

TrepH said...

Great chart, I just posted a Cup & Handle Pattern on Crude and our targets seem well within range.


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