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Crude Oil and AMEX Oil Index Analysis and Forecast Trends

Commodities / Crude Oil May 28, 2009 - 10:29 AM GMT

By: David_Petch


Diamond Rated - Best Financial Markets Analysis ArticleThe daily chart of oil is shown below, with upper Bollinger bands riding the index, while the lower 21 MA BB is just starting to rise after a shallow decline. Based upon positioning of the lower 21 MA BB, there could be another 1-2 weeks of topping in the price of oil before a short-term top is put in place. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in all three instances. Stochastics 1 and 2 appear to be topping out in an oversold state, with the potential to grind sideways for another 2-3 weeks. I should note though that a sudden reversal in the USD once it bottoms will end the run up in oil…not in yet but expect it to happen within the next month.

Figure 1

The weekly chart of oil is shown below, with the lower 55 MA Bollinger band at -$12.09/barrel. It could take another 2-3 years to consolidate the move from $145/barrel to $35.change/barrel. Upper and lower 21 and 34 MA BB’s continue to rapidly ascent towards the index price, suggestive that a breakout to the upside or downside is possible in 1-2 months when they are near the index. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in stochastics 1 and 2. Until the %K in stochastic 1 curls down, there is no indication that the trend presently underway is complete…Although stochastics may be stretched Figures 1 and 2 indicate the upward move is not over yet.

Figure 2

The monthly chart of oil is shown below, with the lower 21 and 34 month MA Bollinger bands still declining, while upper BB’s continue to drift sideways…this indicates strong resistance at the $145/barrel area and until the upper BB’s begin to drift lower, anticipation of a bottom (likely a higher termination point of the $35/barrel lows) is extended out another 18-24 months at least. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in all three instances. The take home message from this chart is to respect the present upward trend in oil, but to also respect the higher degree trend which has a negative bias to the downside.

Figure 3

AMEX Oil Index
The daily chart of the XOI is shown below, with upper Bollinger bands continuing to drift sideways above the index, while the lower 21 MA BB is starting to rise to meet the index. Based upon this trend, it appears the XOI is in a topping pattern that could extend another 2 weeks before declining. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in stochastics 1 and 2.  Stochastic 3 still has the %K well above the %D, but all the other indicators on this chart are flashing that a top may have been put in place. It is suggested to proceed with caution for those playing with energy stocks at present, namely oil.

Figure 4

The weekly chart of the XOI is shown below, with the lower 55 MA Bollinger band still declining, but appears to finally be attempting to curl up, suggestive a top has been put in place. Upper and lower 21 and 34 MA Bollinger bands are setting up to come within close proximity to the XOI consolidation pattern between October 2008 till present, suggestive that a breakout to the upside or downside is possible in the coming months. Full stochastics 1, 2 and 3 are shown below in order of descent, with eth %K in stochastics 1 and 2. Until the %K in stochastic 1 falls beneath the %D, there will be no “clear” sell signal…however, when the %K for this stochastic generally curls down before crossing beneath the %D, it generally indicates that a top has been put in place (it is in a transitory position, so we will have to follow up with this observation next week  to see how it plays out).

Figure 5

The monthly chart of the XOI is shown below, with lower 21 and 34 MA Bollinger bands declining beneath the index. Upper Bollinger bands are still drifting sideways and must start to decline so that the 2003-2008 move can be fully corrected in time before heading higher. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in all three instances. Based upon the monthly chart, there is still further weakness ahead for the XOI, albeit a trading range etc.

Figure 6

The short-term Elliott Wave count of the XOI is shown below, with the thought pattern forming from one month ago denoted in green (added after the initial thoughts of the pattern were laid out in early March. The XOI has pretty much followed the pattern to a tee, but there has been no final upleg yet to the 1000-1050 area yet. I will update the thought pattern next week because in theory, this pattern still has time to play out, albeit another 1-3 weeks.

Figure 7

The long-term Elliott Wave count of the XOI is shown below, with the thought pattern forming denoted in green. How long the XOI takes to reach the shown target is as good as anyone’s guess, but once complete, expect a pattern of some form to develop, likely testing the double bottom put in place late last year.

Figure 8

That is all for today. Back tomorrow AM with an update on either gold or the HUI (anyone with a preference of what they want to see first, let me know.

By David Petch

I generally try to write at least one editorial per week, although typically not as long as this one. At , 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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