Crude Oil Forecast: WTI’s Technical Factors Call for $43.2

By Dean Rogers

WTI stalled near $48.0 as we expected in our weekly Crude Oil Commentary and the sustained close below $44.7 calls for a test of key support at $43.2. This is a confluence area that is near the 0.618 projection of the wave $51.42 – 42.58 – 48.36. A close below $43.2 would confirm the negative outlook and open the way for a continued decline.

The Kase Easy Entry System (KEES) confirms the negative bias. Today’s pink dot indicates that the majority of momentum indicators are permissioned short on the daily chart and that the synthetic three-day filter is also permissioned short.

CLZ5 20151109

That said, the shorter intraday bar lengths are showing that the decline from $48.36 is a bit overextended, exhausted, and due for a correction. The correction will most likely take place once $43.2 is met. First resistance is $44.5. Key resistance is $45.4, the 38 percent retracement from $48.36 to $43.64. Both levels are in line with the opening prices of the last few days. A close over $45.4 would call for an extended upward correction and a likely trading range for the near-term.

This is a brief analysis and crude oil forecast for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.

The price of natural gas, or any commodity for that matter, is theoretically the fair price at a given time. Traders will buy gas when they think prices are going to rise, and sell it when they think it will fall. This may be oversimplifying the process a bit (okay, a lot), but the point is that rising and falling prices are reflected on charts.

Charts tell us what traders and other market participants think about the market and the actions that they are taking (buying or selling). Interpreting price action on charts is the forte of technical analysis. Therefore, technical analysis is good at telling us what the market knows about itself, especially for the near-term.

For the long-term, technical analysis can be used as a guide, but people change their minds, and therefore, so does the market. When these changes of heart and mind take place, so does the direction of the market and the reflection of price action on the charts. As a result these changes are reflected in the underlying technical factors too.

Here is what we are currently seeing on the daily chart and the $0.035 Kase Bar chart:

  • Tuesday’s close above Friday’s midpoint was positive but the $2.716 open held.
  • The move up was corrective and about the same size ($0.125) as prior corrections from $2.902 ($0.136) and $2.788 ($0.099).
  • The KaseCD and KasePO momentum indicators are declining.
  • The underlying KEES permissions (color-coded dots) are transitioning back to being short.

natural gas forecast

Therefore, for the near-term, the natural gas charts are tell us that prices will continue to decline to at least $2.54. This is a confluent support target and is the July contract’s low. It is too soon to say that prices will stall here. In fact, other than a correction once $2.54 is met, most technical factors call for prices to continue to decline to major targets we discuss at great length in our weekly Natural Gas Commentary.

Resistance at $2.79 is the 38 percent retracement of the decline and expected to hold. This threshold will be lowered to $2.76 once $2.54 is met.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

Natural gas prices are still oscillating in the corrective range between approximately $2.60 and $3.00. Early in the week it looked as though natural gas prices were ready to continue the decline. However, while there is little doubt that the long-term bias is negative, Wednesday’s price rise has called into questions how soon natural gas prices will fall to new contract lows.

Monday’s gap from $2.783 was filled early Wednesday and then April futures overcame the 0.618 projection at $2.80 for the wave up from $2.641. The $2.80 level was also near the 62 percent retracement of the decline from $2.87 to $2.662. The confluence of the wave projection and retracement at $2.80 makes it a crucial decision point for the near term outlook. Should natural gas prices close over $2.80, look for at least $2.89 because it is the 1.00 projection. This level is most important because it is also the 62 percent retracement from $3.045 to $2.641, the 0.618 projection for the wave up from $2.589 (not shown), and is in line with last weeks $2.87 swing high. A close over $2.89 would open the way for an extended correction and would further delay a decline to new contract lows.

natural gas prices

The first class long permissions (blue dots) for the Kase Easy Entry System (KEES) indicate the move up will likely continue, and that $2.89 should at least be tested tomorrow. However, the bearish KCDpeak (red K above 2.848) indicates the move up is already overbought on the 120-minute equivalent Kase Bar chart. A move above $2.848 would negate the KCDpeak, and as long as the KEES permissions remain long (blue dots) the near-term bias will remain positive.

Look for support at $2.73. A close below this over the next few days would shift the near-term bias back to negative and call for the $2.641 swing low to be challenged.

Learn more information about Kase’s energy price forecasts.
Learn more about KEES, which is part of Kase StatWare.



Kase’s senior analyst Dean Rogers reviews trade setups and price forecasts for e-mini S&P 500, crude oil, natural gas, AAPL, and VIPS using Kase Outlook, Kase StatWare, and KaseX.

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On October 1, 2014, Kase commented on a tweet, and posted the weekly chart shown below, regarding the decline of Hertz (HTZ). In that tweet, we stated that the decline from $31.61 was likely a corrective Wave IV of a long-term bullish five-wave formation. A week later, on October 8, we discussed the trade setup during our weekly chat session (minutes 16:50 – 21:00). At that point, the 38 percent retracement at $22.47 had been taken out, but we stated that for the five-wave formation to remain intact, the top of Wave I ($17.64), which was in line with the 62 percent retracement at $16.84, would need to hold. We also commented that we were watching the daily chart for bullish signals such as completed momentum divergences and oversold signals that would tell us the move down was possibly complete.

Figure 1 – HTZ Weekly as of October 1, 2014
HTZ Weekly 20141001

Fast-forward a few weeks later, and the next chart below shows that the move down stalled at $18.50 on October 15. The $18.50 swing low held the 62 percent retracement and top of Wave I as called for. A recovery has begun to take place, indicating Wave IV is likely complete and Wave V is underway. In addition, Wave IV ended up being a simple correction versus the Wave II correction. If you look closely at the details of Wave II you will see that it broke down into a complex five-wave, or nested three-wave correction. This is called the “rule of alternation”, which indicates one of the corrections will be complex and the other simple when a five-wave pattern is forming.

Figure 2 – HTZ Weekly as of October 28, 2014
HTZ Weekly 20141028

Table 1

Wave III met the intermediate (I, or 1.382) projection of Wave I, $1.55 – 17.64 – 7.80. This formation now has the potential to extend to $33.5 over the course of the longer-term (a few months or more). This is because Wave I projects to $33.5 as the larger than target (L, or 1.618). This is also the smaller than (S, or 0.618) projection for Wave III, $7.80 – 31.61 – 18.5. Most importantly, for this to be a textbook five-wave formation, at least two waves have to be equal. Rising to $33.5 would make Waves I and V nearly equal in size (Wave I = 17.64 – 1.55 = 16.09, Wave V = 33.5 – 18.5 = 15.0). If Waves III and V end up being equal, the move up would extend to $42.3. So over the course of the longer-term, as the probable Wave V extends, we now know that the potential for this move is $33.5 and possibly $42.3.

As we had discussed in our weekly chat session on October 8, once Wave IV was complete, we wanted to drop down to time a long entry on the daily chart. However, we needed to see evidence on the daily chart that the move down was likely complete. When dropping to the daily chart shown below, as of October 28, we can see that a bullish KaseCD divergence (red line) and KasePO PeakOut (green P) were confirmed at the $18.50 swing low, and that two subsequent buy signals (green and blue L) triggered. These are signals from our Kase StatWare indicator package and show that a trader may have established a long trade on the daily chart upon the second L (marked by the blue arrow) on October 20 at approximately $21.39. A stop would be placed at $19.07, which is DevStop3, or approximately 3.6 standard deviations of average True Range (ATR).

Figure 3 – HTZ Daily with Kase StatWare as of October 28, 2014
HTZ Daily 20141028

Traders holding this long position would now monitor the daily chart for exit and warning signals. One such warning signal was triggered by the gray K, which is a weak KCDpeak. Traders may have pulled stops into DevStop2 (second blue dot), and once the accompanying $22.60 swing high is overcome, the stop will be widened back to Dev3 (third, and largest, blue dot).

In addition to monitoring the daily chart, traders could also watch for a confirmed buy signal (L) on the weekly chart. This has not triggered yet, but once a buy signal forms on the weekly chart, a trader could scale the daily trade to the weekly chart, widen stops to DevStop3 on the weekly chart, and then monitor the weekly chart for exit and warning signals. The long signal on the weekly chart will warrant the added risk of holding a trade with wider stops on the weekly chart. This ‘scale up’ technique is useful for holding positions over longer periods of time and avoiding whipsaws. This technique also limits initial trade risk because the standard deviations of ATR (method used for Kase’s DevStops) on the daily chart are smaller than standard deviations of ATR on the weekly chart. Therefore, if the trade does not play out as expected, a trader can get out of the trade sooner on the daily chart, limit losses or preserve any gains, and live to trade another day.

At this point, we can also analyze the recent move up from $18.50 and look for important near-term resistance. When forecasting, we primarily rely upon confluence of Fibonacci wave projections and retracements. For instance, the smaller than (S or 0.618) projection for Wave 1/V, $18.5 – 22.6 – 20.77, shown in the chart and table below, is $23.5. This is confluent with the 38 percent retracement from $31.61 to $18.5 (magenta line). This then connects to $24.7 as the equal to (E, or 1.00) projection, which is near the 50 percent retracement. The intermediate target (I, or 1.382), is $26.6. This is also the crucial 62 percent retracement. Therefore, the wave projections for Wave 1/V, and the retracements of the decline from $31.61 to $18.5, show a cascade of targets that connect to one another.

Figure 4 – HTZ Daily with Retracements as of October 28, 2014
HTZ Daily Retracements 20141028

Table 2

What this indicates, is that $23.5 is an important near term resistance level. Currently, the move up from $18.5 is corrective of the move down from $31.61. Generally, a normal, profit taking correction, will hold the 38 percent retracement. However, because this is also the smaller than target, our studies show that meeting $23.5 will open the way for an extension to at least $24.7, the equal to target. A close over $24.7 would then call for $26.6, which is the key threshold for a bullish long-term outlook. This is because $26.6 is the 62 percent retracement and connects to $33.5 as the trend terminus. As discussed earlier, $33.5 is the larger than target for Wave I, and would make Waves I and V equal. Therefore, when all is said and done, the connection to $33.5, and completing the five wave pattern, is made through $23.5.

This analysis does not mean that HTZ will absolutely rise to $33.5. The move up may prove to be corrective, stall, and continue to decline. However, based upon the factors discussed above, the potential for $33.5 is present. The forecast is a road map for the near-term, and the StatWare indicators are the vehicle used to navigate the turns in the road. Each of the targets discussed is a potential stalling point for the move up, and levels at which traders holding a long position will want to closely monitor for exit and warning signals generated by their indicators, like divergences, PeakOuts, and KCDpeaks. If these types of signals trigger, then profit will be taken. Otherwise, the long trade will be ridden higher, possibly scaled to the weekly chart upon confirming buy (L) signals, and ultimately exited when an exit signal triggers on that chart.

These are just a few of Kase’s trading and forecasting techniques that can help make you a better, and more informed, trader. If you would like to learn more, join us for our free weekly educational chat sessions, take a trial of our trading indicators, and if you are an energy trader, take a trial of our weekly crude oil and/or natural gas forecasts.



This proprietary, state-of-the-art, market-timing indicators condenses its signals into a simplified, color coded display system to fine tune entries and exits. StatWare™ is valued by traders because it combines high accuracy with ease of use. Works with all liquid and active stocks, commodities, futures, indices and FOREX.

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