Brent Crude Oil Nearing Key Decision Point

Tag: Crude Oil

Brent crude oil prices will likely test a key decision point at $68.0 this week. This is the 1.00 projection for the wave up from $50.1, and a confluent projection for the sub-waves up from $53.63. A close over $68.0 would confirm that a long-term bullish recovery is underway. Narrowing calendar spreads support the move up, but are still wide by historic standards. First class long permissions (blue dots) on the KEES indicator also confirm the positive tone.

That said, momentum is waning on the KaseCD and is setup for a bearish divergence (higher high in price with lower high in momentum). The KasePO is quickly nearing overbought territory. There are also a daily bearish hanging man and evening star setup. These and a few other negative factors tell us that Brent will likely stall at $68.0. We expect to see a significant correction take place to test the mettle of the market before the move up extends much higher than $68.0.

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Brent Crude

June WTI crude oil has oscillated in the range of a broadening wedge over the last eight trading days. The pattern is bullish, but the euphoria of WTI’s recent price surge is waning. Mixed technical and fundamental factors indicate the pattern will fail if the $58.41 swing high is not overcome soon.

Key technical support for the near term is $55.3 because it is the 1.00 target for the wave down from $58.82, and intersects with the lower trend line of the expanding wedge. This wave stalled at its 0.618 projection of $56.5, so the market is sitting on the teetering edge of a decline to $55.3 or push higher to overcome $58.41. A close over $58.41 would confirm a break higher out of the wedge and would open the way for an extended upward correction. A move below $56.5 would open the way for $55.3 to be challenged. Overall, odds are still slightly in favor of the move up and a break higher out of the wedge, but a close below $55.3 would indicate the pattern has failed.

For more detailed weekly analyses of WTI, Brent, and Natural Gas please take a trial of the Kase Energy Forecasts.

WTI Crude Oil

WTI crude oil rose for a second straight day due to the declining dollar. The long-term bias is still negative, so the move up is corrective. However, mixed fundamental and technical factors indicate the correction should extend to at least $48.2 before settling into another trading range. This is the 1.00 projection for the wave up from $44.03 and the 38 percent retracement of the decline from $54.0. A close over $48.2 would call for $50.4, the 1.618 projection and the 62 percent retracement. Look for immediate support at the $45.33 and $44.77 swing lows.

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WTI Crude Oil

WTI crude oil is trying desperately to show that a bottom has been made and that a recovery is underway. WTI is testing a crucial decision point at $54.0. This is the 0.618 projection for the wave, $43.58 – 54.24 – 47.36. Most waves that meet the 0.618 projection extend to at least the 1.00 projection, in this case, $58.0. However, a pullback will usually take place first.

Support at $49.9 should hold, but the $47.36 swing low is the level that must hold for the near-term outlook to remain positive. A close below this would negate the wave up from $43.58, and call for a continued decline.

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CLH5

Brent has been trading in a corrective range for the past several days, but fell to major support at $47.7 on Tuesday. This is the 0.618 projection for the wave $52.42 – 48.07 – 50.41. The $47.7 projection connects to a major target at $45.8 as the 1.00 projection. This is also the 1.618 projection for the largest and most important wave down from the $111.38 contract high. KaseX confirms the negative call with confirmed short signals (purple triangles) on the 120-minute equivalent Kase Bar chart.

For more information about KaseX please visit our trading indicators page. The learn about our forecasts please visit our energy forecasts page.

Brent

Natural gas has finally showed some signs of life over the past few days in anticipation of tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update. The short-term charts are showing that traders are anticipating a bullish EIA report, which would be the support the market needs to continue this upward correction. Keep in mind though, this is a correction, and it will likely be predominant in the winter month contracts and short-lived without continued support from external factors.

After oscillating in a sideways range between approximately $2.79 and $3.00 for the past six trading sessions, the February futures contract rose above $3.00 on Wednesday. This is near the $3.176 to $2.783 midpoint of $2.98, which is significant because this is also in line with the 0.618 projection of the irregular wave $2.803 – 3.176 – 2.783. The $1.00 projection of this wave was overcome at $3.15, and the 1.618 projections is $3.38. The $3.38 level is important because it is the 50 percent retracement from $3.95 to $2.783. This level will likely be met, and possibly overcome, upon a bullish EIA number tomorrow.

NGG

In addition, February overcame the crucial $3.176 swing high, and a sustained close over this would confirm the recent bottoming formation (arguably a triple or even quadruple bottom). The projection for this formation is $3.56.

Near-term support is $3.04 and then $2.94. These are the 38 percent and 62 percent retracements of the move up from $2.783 to $3.204 (swing high as of this analysis). These levels are also near the midpoint and open of today’s candlestick. A close back below $3.04 would call into question the validity of the move up. A close below $2.94 would negate the near-term positive tone altogether, and open the way for a continued decline.

The long-term outlook for natural gas is bearish, but the move up over the past two days has shifted the near-term outlook to positive. A close over the $3.176 swing high today will open the way for an extended correction to $3.38 and possibly higher tomorrow.

For more information about Kase’s weekly energy forecasts on natural gas and crude oil please visit our energy forecast page.

Dean Rogers
Senior Analyst
Kase and Company, Inc.

February 2015 WTI crude oil broke lower out of a coil formation on Friday and continued its decline on Monday, December 29. The target for the coil is $49.8, and is in line with a highly confluent $49.7 objective that we have discussed as a potential stalling point for several weeks. A close below $49.7 would open the way for $46.9 and $45.5. Initial resistance is $56.0, the apex of the coil. Key resistance is $61.8, which is near the coil’s $62.1 upper target.

Take a trial of Kase’s weekly energy forecasts to get more in depth analysis, targets, and probabilities.

clg5

Coming into this week there was an outside chance that Brent would hold $67.0. However, prices settled below $67.0 on Monday. There is immediate support at $65.2 as discussed in this week’s Crude Oil Commentary, but the decline is now poised for at least $62.8 and likely $58.5 before a measurable retracement takes place. The key target is $58.5 because it is the most confluent wave projection and the equal to (1.00) target for the wave $112.59 – 83.41 – 88.42. A sustained close below this will open the way for $53.8 and $48.7.

There is very little evidence that the move down is going to end at this time. Prices are still deeply oversold and overdue for a correction, but until at least initial resistance at $70.5 is overcome, the move down is favored. Next resistance is $72.1, and a close over the this would call for and an extended correction to $75.1 and possibly $79.8.

For detailed weekly forecasts take a trial of our energy commentaries.

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