Sunday, January 8, 2012

Crude Oil (CL) Weekly Outlook/Strategy (01/08/12 - 01/13/12)

Going into Friday, I was watching for the clear possibility of crude throwing up a weekly shooting star/reversal candle at prior channel resistance. However, there was some real strength in the entire complex, with quite an impressive move out of /HO and /RB in particular, that negated the weekly reversal candles.

I believe the chart shows an upward bias but we have to keep our minds open to multiple potential scenarios. At this point, the stars seem to be aligning for a sharp move with clear areas to initiate trades, both long and short, w/ solid potential R/R.

Weekly: The weekly ichimoku chart is neutral to bullish. The rising tenkan-sen is above the kijun-sen. Chikou is above prior price with clear air from here. Our 10-wk ma is rising and above the 30-wk ma which is flat. MACD and RSI are both positive and rising. 

However, kumo still remains bearish and will not flip bullish until we can make new closing highs. An area of concern would be the topping tails that have resulted on increased volume on each touch of prior channel support. This rail has clearly turned into resistance.

Daily: The daily chart is bullish. Kumo is in a clear bullish trend. Tenkan-sen has acted as support last week, and is rising and above the flat kijun-sen. Kijun-sen will stay flat unless new highs are made. Chikou is above prior price. As we made new highs last week, we are able to draw a new flatter uptrend line which could provide a more sustainable trend. We have our clear resistance above at 103.38. Closing above this level gives us a breakout with a measured move to 131.88. More major resistance levels above come at 106 then 113.70, 122.50, and 131.8.  

The only potential bearish point would be a bearish engulfing candlestick formed on Thursday, at resistance, on increased volume. A break below Friday's lows may lead to an uptrend test down towards the key 97.53 pivot. 

240min: The 4 hour chart is bullish. We can see a clear inverted H&S pattern with horizontal resistance. I've also drawn in the possibility of a rising neckline. 

This timeframe has formed a negative divergence on our MACD and RSI. Kijun-sen has been holding as support and will rise considerably on the open today. A move below may take us to our nearest support area 99.97-100.15. 

60min: This shorter timeframe is neutral to bearish. Kumo is bearish and tenkan-sen has crossed below the kijun-sen. We appear to be flagging in a channel and have backtested our smaller inverted H&S neckline that I discussed last week. Ideally, in our bullish scenario, we would like to hold our neckline and get long on a channel breakout. An area of concern on this timeframe would be that our selloffs are coming on increased volume.

Overall, I believe most parties will be anticipating an upside break. I believe that we may continue to see some choppy action for an extended period. I've included charts of /RB and /HO below and as is clearer on the longer term timeframes, they've been somewhat rangebound. Clear breakouts from these two would verify a bullish case in the energy complex.

The stars appear to be aligning with some type of major move in the markets coming very soon. I will have another blog post up this evening with some of the other markets I have on my radar. Thanks for reading and good luck trading this week!