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Trading Lessons

Crude Oil, Natural Gas and the AMEX Oil Stocks Index Analysis and Forecast Update

Commodities / Crude Oil Dec 21, 2010 - 04:04 AM GMT

By: David_Petch

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleThe daily chart of oil is shown below, with upper Bollinger bands above the index, suggestive that a short-term top was put in place. Lower 21 and 34 MA Bollinger bands are in close proximity to each other and starting to rise, indicating 2-4 weeks of sideways to downward price action. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the D in 3. The %K in stochastic 1 noticeably hooked down, further confirming 2-4 weeks of weakness in prices. The next level of support is at $83/barrel.


Figure 1


The weekly chart of oil is shown below, with upper Bollinger bands in close proximity to the index, suggestive that further upside potential exists. Lower 34 and 55 MA Bollinger bands are starting to curl down, suggestive that further upside potential exists. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. Extrapolation of the present trend suggests that a top is not likely to be put in place for another 2-3 months.

Figure 2


The monthly chart of the XOI is shown below, with lower 34 and 55 MA Bollinger bands beneath the index. There is no definitive pattern to suggest that a decline phase is set to start anytime soon...it anything, the chart suggests a top is not likely to be put in place for at least another 10-12 months. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. Extrapolation of the trend suggests at least 10-12 months of sideways to upward price action before topping out. Overall, the price of oil should be stable over the course of 2011.

Figure 3


Natural Gas

The daily chart of natural gas is shown below, with upper Bollinger bands well above the index, suggestive that a top was put in place. The lower 55 MA Bollinger band recently curled up, further confirming the top. The lower 21 MA Bollinger bands recently touched the index, suggestive that further downside lies ahead. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in 1 and 2 and above the %D in 3.Extrapolation of the %K in stochastics 1 and 2 suggest 3-4 weeks of further downside before a bottom is put in place.

Figure 4


The weekly chart of natural gas is shown below, with upper and lower 21 and 34 MA Bollinger bands in close proximity to the index. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. Although the %K in stochastics 1 and 2 are above the %D, the %K in stochastic 3 is still declining, suggestive that weakness could persist for another 4-6 months before basing.

Figure 5

The monthly chart of natural gas is shown below, with upper and lower 34 and 55 MA Bollinger bands well beneath the index, suggestive that the corrective phase from the 2008 top is not yet complete. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. Although the %K in stochastic 1 indicates an upward trend is in place, natural gas prices are likely to remain range bound over the course of the next 4-6 months.

Figure 6

AMEX Oil Index

The daily chart of the XOI is shown below, with upper Bollinger bands above the index, suggestive that a short-term top was put in place. Lower Bollinger bands are set to rise, but lower 21 and 34 MA Bollinger bands are too close to each other to trigger a sharp decline. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. The %K in stochastic 1 curled down, suggestive that weakness is likely to persist for at least 3-4 weeks.

Figure 7

The weekly chart of the XOI is shown below, with upper Bollinger bands in close proximity to the index, suggestive that further upside potential exists. All three lower Bollinger bands are in close proximity to each other, with the lower 34 and 55 MA Bollinger bands declining, suggestive that further upside potential exists. When they both curl up, a top will likely have been put in place...this event is not likely to happen for at least 4-6 months, possibly even late 2011.

Figure 8

The monthly chart of the S&P 500 index is shown below, with lower 34 and 55 MA Bollinger bands in close proximity to each other and well beneath the index, suggestive that further upside potential lies ahead. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and 2 and beneath the %D in 3. The %K in stochastic 1 is at a minimum of 6 months before any sort of top is put in place...more likely to be late 2011/early 2012.

Figure 9

The long-term Elliott Wave count of the XOI is shown below, with the thought pattern shown in green...this pattern was added over one year ago and followed the trend very well. I am going to update this pattern in a few weeks...I am still playing around with a few different counts and trying to determine which one has the best potential. Based upon what the above charts are stating, the next 12 months are most likely to maintain an upward trend, with minor corrections along the way.

Figure 10

That is all for today. Have a good one and back tomorrow with an update on stocks I am following as well as an update on gold.

By David Petch

http://www.treasurechests.info

I generally try to write at least one editorial per week, although typically not as long as this one. At www.treasurechests.info , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

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Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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