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!

Crude Oil (CL) Weekly Outlook/Strategy (12/18/11 - 12/23/11)

If you're one of the few people who read my weekly outlook from last week, you weren't taken by surprise by the move we saw in crude this past week. Taking a look at the weekly charts of energy complex this week, I am beginning to see a bit of a mixed message. As you can see, heating oil (HO) has been exhibiting relative strength and will be key to watch going forward. 

Potential BULLISH scenario: we see the possibility of weekly flags/down channels developing in the complex. There is a very real possibility that we see a bounce over the next couple of weeks with a potential move higher through these channels to new highs.

What is keeping my BEARISH: Gasoline (RB) appears to be breaking down through its multi-year upchannel. It has been holding fairly tightly within a shorter term down channel but is sitting at a key support level at the 2.446 area. It is currently below the kumo which has flipped bearish and chikou firmly below prior price.

Both HO and RB have imminent MACD centerline crosses on the weekly charts. The MACD centerline has firmly respected in past uptrends and prior bearish crosses have led to substantial declines. Another level to watch would be the RSI falling below 40. This also tends to hold in uptrends and is broken prior to significant downtrends.

Looking specifically at the weekly crude oil chart, last week confirmed the backtest and rejection of our prior upchannel. This coincided with chikou rejection at June prices. We managed to find support at the tenkan-sen and bottom of our kumo. MACD also appears to be rolling back over.

The daily chart has the potential for a channel/flag to begin forming. We have had a bearish cross of the tenkan-sen below the kijun along with chikou falling below price. We also see a potential bearish MACD centerline cross. 

In the shorter term, the 95.20 area is a key area. Bullish above, bearish below. There should also be strong support in the 90.45 area coming from previous price as well as the top a bullish kumo. I've laid out a couple of possible moves in the near term. We should keep in mind that in the commodities, trends tend to persist with shallow pullbacks. If this is the beginning of a new downtrend, rallies will be shallow and it will be difficult to be able to find easy entries into a short swing-type position.

On the hourly time frame, we are firmly in a downtrend. However there area positive divergences as new lower lows in price were met with higher lows in both RSI and MACD. Although the 90.45-95.20 range I discussed is quite large, I believe that anything within this area will be noise and only for the very short term trader.

I will be looking to sell the 95.20 area or a break below 90.45 area. I do not want to be caught in "no-man's land" as @HCPG from the twitter-verse consistently refers to. There is the potential for a lot of random action going into year's end, but I have a short bias with distinct areas where I will be willing to do business. Also, keep in mind that we will be switching over to the G (February) contract this week.

Once again, thank you for reading and any comments or feedback are always appreciated.