Crude Oil Short-Term Forecast – February 27, 2018

WTI crude oil’s settle below Friday’s $63.1 midpoint and the daily bearish engulfing line is negative for tomorrow’s outlook.

There is immediate support at Friday’s $62.6 open, but the small wave formation down from $64.24 calls for at least $62.3 and likely $61.9. The latter is most crucial for the near-term because it is the 50-day moving average, the 38 percent retracement of the move up from $57.9, and is near last Thursday’s $62.1 midpoint.

April WTI Crude Oil - Daily
April WTI Crude Oil – Daily

A close below $61.9 would open the way for a test of key support at $60.3. This is the 62 percent retracement of the move up from $57.9 and is near calendar January’s open. Settling below $60.3 would shift long-term odds back in favor of a continued decline.

That said, the move down is probably corrective of the move up from $57.9. Today’s $63.5 midpoint and $64.1 open are initial resistance. $63.5 should hold but $64.1 is key. A close above this would call for tests of $64.5 and $65.5, the last levels protecting the $66.39 high.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

March natural gas finally settled above February’s 9’s $2.64 midpoint. The move up is most likely corrective of the decline from $3.259 and will continue to be a grind. However, natural gas should now challenge at least $2.71 and possibly higher before the decline ultimately continues.

The wave $2.53 – 2.662 – 2.565 met its $2.65 smaller than (0.618) target today. Waves that meet the smaller than target typically extend to the equal to (1.00) target, in this case, $2.71. This is an important objective because $2.71 is also in line with February 9’s open and is the completion point of the weekly morning star setup.

March Natural Gas - 0.035 Kase Bar
March Natural Gas – 0.035 Kase Bar

Settling above $2.71 would call for a larger upward correction and test of key near-term resistance at $2.81. This is the 38 percent retracement of the decline from $3.259 and the 50-day moving average. For the move down to continue in the near-term $2.81 must hold. A sustained close above this would not doom the move down, but rather dampen the odds for a continued decline to targets below the continuation chart’s crucial $2.522 swing low over the next few weeks.

March Natural Gas - Daily
March Natural Gas – Daily

Initial support is $2.61 and key support for the next few days is the $2.565 swing low. A move below this would wipe out the aforementioned wave up from $2.53 that projects to $2.71 and higher. This would also shift near-term odds back in favor of testing $2.51 and lower.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

April WTI crude oil’s move up from $57.9 is most likely corrective of the decline from $66.39 and may be complete. Important resistance was met at $62.65, a bearish intra-day KaseCD divergence was confirmed, and the subsequent move down is poised to extend. Trading over the next few days should indicate whether the upward correction is complete.

Today, the larger than (1.618) target of the wave $57.9 – 60.61 – 58.09 was met at $62.65. The subsequent wave down, $62.65 – 61.43 – 62.43 has fallen below its smaller than (0.618) target and is now poised to reach at least the $61.2 equal to (1.00) target tomorrow. A close below this would open the way for $60.7, $60.3, and $59.7. Key support for the near-term is $59.7, the 62 percent retracement of the move up from $57.9. Settling below this would put odds strongly back in favor of a continued decline.

April WTI Crude Oil - 0.50 Kase Bar
April WTI Crude Oil – 0.50 Kase Bar

For the move up to continue, support at $59.7 must hold and prices will have to ultimately overcome $63.2, the 62 percent retracement of the decline from $66.39. Tomorrow, look for first resistance at $62.1 and key resistance at $62.6. A close above $62.6 would call for a test of $63.2.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

The outlook for March natural gas remains negative but the formation of another daily star (in this case a hammer) and the small wave formation up from $2.538 indicate there is still a good chance for the upward correction to extend first. However, as stated over the past few days in our premium analysis and daily updates, unless prices settle above at least $2.65 and likely $2.70, to complete and then confirm the morning star setup, odds will continue to favor a test of key support at $2.52.

Initial support is $2.56, the smaller than (0.618) target of the wave $2.642 – 2.553 – 2.619. A move below this early tomorrow will open the way for $2.52, the intermediate (1.382) target. This is a key objective because $2.52 is in line with the continuation chart’s $2.522 swing low and is also the 62 percent retracement of the move up from $1.611. A sustained close below $2.52 will call for a much more negative long-term outlook.

March Natural Gas - Daily
March Natural Gas – Daily

Should the corrective move up extend and settle above $2.70 to confirm the morning star, odds will shift in favor of a larger upward correction to at least $2.76 and likely $2.81 before the decline continues. For now, given all factors, $2.81 is expected to hold because it is the 38 percent retracement of the decline from $3.259 and near the 50-day moving average. Settling above $2.81 would call the market’s bearish sentiment into question and the likelihood of a near-term decline to targets below $2.52.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

Outlook for WTI

March WTI crude oil’s formation of a second daily star (in this case a hammer), confirmed daily KCDpeak, oversold Stochastic, and failure to break the $58.07 swing low are all factors that indicate the upward correction from $58.07 still has a reasonable chance of extending before the decline continues. However, unless WTI settles above at least $59.8 and more likely $60.4 to confirm the morning star setup (made up of the aforementioned stars) odds will continue to favor a decline.

March WTI Crude Oil
March WTI Crude Oil

Initial support is the $58.39 swing low, and an early move below this tomorrow will call for $58.0, the smaller than (0.618) target of the wave $60.83 – 58.39 – 59.49. This is a key objective because it is the lowest that the initial wave down from $66.66 projection and is the 38 percent retracement of the move up from this past summer’s $43.91 swing low. Settling below $58.0 will open the way for $57.6 and very likely $57.1, the equal to (1.00) target of the wave down from $60.83.

Should the upward correction attempt to extend again tomorrow, look for initial resistance at last Friday’s $59.8 midpoint. This is the completion point of the morning star setup, a close above which would call for the $60.4 confirmation point. The $60.4 level is key for the near-term because it is also sitting just above the smaller than target of the wave up from $58.07. Settling above $60.4 would call for a likely move above the $60.83 swing high to $61.4, which is in-line with the equal to target of the wave up from $58.07 and the 38 percent retracement of the decline from $66.66.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

Outlook for Natural Gas

March natural gas fell below the $2.693 swing low, which nullifies the wave $2.532 – 3.035 – 2.693 and any potential that the move up from $2.532 would extend as a five-wave pattern. Today’s decline also wiped out the yesterday’s bullish hammer and intra-day bullish divergences. Therefore, as of this afternoon, there is no technical evidence that the move down will stall before reaching at least $2.65.

The $2.65 objective is the smaller than (0.618) target of the waves $3.259 – 2.837 – 2.92 and $2.92 – 2.695 – 2.782. Settling below $2.65 will open the way for $2.60 and more likely $2.56, which then connects to $2.50. The connection between these targets is of utmost importance. A move to $2.50 would take out the continuation chart’s $2.522 swing low and confirm a long-term bearish outlook.

March 2108 Natural Gas - Daily
March 2108 Natural Gas – Daily

If there is anything positive that can be said, the wave structure down from $3.259 still lacks depth. So far, all of the upward corrections have been less than 21 percent retracements. There is no guarantee that an upward correction will take place, but daily momentum is reaching oversold territory.

For now, look for initial resistance at $2.76 and $2.82. The higher of these should hold as it is the 21 percent retracement of the decline from $3.259 and the 62 percent retracement from $2.92. Key resistance is $2.87, the 50-day moving average. A close above this would indicate the move down has stalled and could be an early indicator of consolidation before the decline ultimately continues.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

Outlook for WTI

WTI crude oil’s decline wiped out yesterday’s bullish morning star setup and fulfilled the $61.5 larger than (1.618) target of the wave $66.66 – 63.67 – 66.3. If the move down from $66.66 proves to be a three-wave correction the $61.25 swing low should hold. However, as of this afternoon, there is no definitive evidence this will be the case (though an upward correction might take place first as discussed below).

Odds favor a continued decline and a close below $61.2 will open the way for $60.8, $60.2, and $59.3. The next major objective is $58.0, the trend terminus and XC (2.764) projection of the aforementioned wave down from $66.66.

March WTI Crude Oil - Daily
March WTI Crude Oil – Daily

That said, there is a reasonable chance the move down from $66.66 will transmute into a five-wave formation that just completed Wave III at $61.25. If this is the case, then an upward correction to form Wave IV should take place first. Today’s $62.9 midpoint is expected to hold, but the key level is today’s $63.9 open. A close over this would be an early indication that the corrective move down may be complete.

Outlook for Brent

Brent crude oil fulfilled the $65.2 larger than (1.618) target of the wave $70.78 – 67.81 – 70.02 when prices fell to $65.16 today. This is a potential stalling point, but there is no definitive technical evidence that indicates the move down will stall.

If the move down from $70.78 is a three-wave correction of the larger scale move up, then $65.16 should hold. However, this is doubtful because Brent has settled below the $65.6 smaller than (0.618) target of the sub-wave $70.02 – 66.53 – 67.72. This means that this wave should extend to at least its $64.2 equal to target. A close below $64.9 would open the way for $64.2, which then connects to $63.0 and $62.0. The $62.0 target is the next major objective because it is the trend terminus and XC (2.764) projection of the wave down from $70.78 and the larger than target of the wave down from $70.02.

With all of that said, there is a chance the wave down from $70.78 is Wave I of a five-wave pattern that completed Wave III at $65.16. In this case, an upward correction to form Wave IV should take place first. Today’s $66.4 midpoint is expected to hold upon such a correction. Key resistance is today’s $67.2 open.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

The conviction of today’s natural gas price decline reflects the market’s disappointment with external factors. The confirmation of yesterday’s shooting star and bearish divergences do not indicate the move up is over, but significantly dampen the odds for March to rise to the levels that February achieved before its expiration.

The near-term outlook has shifted to negative and calls for a test of at least $2.91 tomorrow. This is near the 50 percent retracement of the move up from $2.532, the 62 percent retracement from $2.693, and the $2.905 and $2.907 swing lows. Settling below this will open the way for key support at $2.81, the 62 percent retracement of the rise from $2.532.

March 2018 Natural Gas - Daily
March 2018 Natural Gas – Daily

That said, although the decline from $3.259 has been aggressive, there is no well-developed wave structure yet. So far, the move down has retraced just over 38 percent of the move up from $2.532. Therefore, an upward correction of the decline from $2.532 should take place before prices fall below $2.91. Such a correction is expected to hold today’s $3.08 midpoint, which is also the 38 percent retracement of the decline from $3.259. Settling above $3.08 would call for a test of $3.14 and possibly higher before the end of the week.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

February natural gas finally broke through $3.32, the upper end of the confluence range around $3.29 +/- $0.03 discussed for the past few weeks. Although the day officially settled at $3.444, prices surged higher after the settlement to $3.628 and fulfilled the larger than (1.618) target of the wave $2.562 – 3.097 – 2.746 and the equal to (1.00) target of the wave $2.746 – 3.288 – 3.07. The confluence and importance of targets in this area make $3.628 a potential stalling point.

That said, it is difficult to call for the move up to stall after such a strong rally. Odds favor a continued rise and a move above $3.59 in early trading will open the way for $3.65 and higher.

Natural Gas $0.035 Kase Bars
Natural Gas $0.035 Kase Bars

Even so, bearish intra-day divergences, a PeakOut (overbought signal), and the small wave down from $3.628 indicate a pullback to $3.48 and possibly $3.42 will probably take place first. Support at $3.42 should hold. Key support is $3.35, today’s open-close midpoint and the 50 percent retracement of the move up from $3.07. A close below this would confirm the move up has stalled, at least temporarily, and call for a test of $3.25, today’s open and the 200-day moving average.

The bottom line is that trading may become extremely volatile over the next few days and even weeks as the market sorts through the extent of the effects of external factors (i.e. developing polar vortex in February). If the market’s outlook is going to remain bullish through the end of winter, it will have to hold support above at least $3.25 and likely $3.35.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil Forecast

January WTI crude oil settled below $56.94, the 62 percent retracement of the decline from $58.14 to $55.0 and the smaller than (0.618) projection of the wave $55.0 – 56.93 – 55.75. However, this afternoon’s late move above $56.94 indicates the move up should challenge the equal to (1.00) projection at $57.7 tomorrow. This is the last major target protecting against a new high. A close above $57.7 would call for $58.4 and possibly $58.9, the intermediate (1.382) and larger than (1.618) projections for the wave up from $55.0.

CLF18 Kase Bar Chart
CLF18 Kase Bar Chart

The move up will probably remain choppy and a good test of support will probably take place once $57.7 is met. For now, initial support is $56.4 and key support is $56.9, the 38 and 62 percent retracements of the move up from $55.0 to $57.22, respectively. Settling below $56.9 would shift near-term odds back in favor of $55.2, the smaller than target of the wave $58.14 – 55.0 – 57.22. This wave then connects to $54.1 as the equal to target.

Brent Crude Oil Forecast

Brent’s move up has been more hesitant than WTI’s this week and is still struggling to overcome the $62.92 swing high. However, today’s settle above the smaller than (0.618) projection of the wave $61.08 – 62.92 – 61.44 indicates Brent should rise to at least $63.3 tomorrow. This is the equal to (1.00) target and the 62 percent retracement of the decline from $64.65 to $61.08. The importance of targets at this level indicate there is a good chance that a pullback will take place once $63.3 is met.

Initial support is $62.0 and key support is $61.4. A close below $61.4 would take out the wave up from $61.08 that projects to target at $63.3 and higher and would shift odds back in favor of a continued decline toward $60.8 and lower.

Natural Gas Forecast

December natural gas hasn’t filled the November 6 gap up from $2.998 yet, but January, February, and March filled their respective gaps today. There is a tremendous amount of support around the bottom of each contract’s gap. Therefore, the move down may stall tomorrow. For December specifically, this area has become $2.99 +/- $0.02.

That said, aside from the confluence of targets around $2.99, the challenge right now is that there are no reversal patterns, only a few intraday divergence setups, that indicate the move down could stall. Therefore, until these signals are confirmed and initial resistance is overcome, near-term odds will favor a continued grind lower.

NGZ17 Kase Bar Chart
NGZ17 Kase Bar Chart

Tomorrow, look for a test of $2.99, a close below which would open the way for key lower support at $2.92. This is the next most confluent target below $2.99 and is most importantly the smaller than (0.618) target of the wave $3.353 – 2.847 – 3.231. The equal to target for this wave is $2.73, which means a close below $2.92 would put odds in favor of falling toward $2.73 during the next few weeks.

Should the bottom of December’s gap at $2.998 continue to hold on a closing basis, there is still a chance for a recovery. Initial resistance is $3.06 followed by $3.10. Key resistance is $3.15. This is in line with the $3.153 swing high, the 62 percent retracement of the decline from $3.231, and the 100-day moving average. At this point, December will have to settle above $3.153 to feel confident that this most recent move down is over.

This is a brief analysis for the next day or so. Our weekly Crude Oil and Natural Gas Commentaries and daily updates are much more detailed and thorough energy price forecasts that cover key futures contracts, calendar spreads, and ETFs. If you are interested in learning more, please sign up for a complimentary four-week trial.