We have had a wild ride with crude oil so far this year. From the depths of $26 to over $51. Recently, the pullback totalled 20% from the June highs. It took roughly 2 months to pull back and now oil has been rising almost every day, heading back to $50. We can also see that the pullback was about 50% of the move up. I also made a note on the chart about a TV panelist yelling about the new bear market in crude oil. While they were almost screaming to remind people to get out, it could not have been a more contrarian call.
However, I think the macro picture is just as important as the daily closeup. First of all, using the volume by price overlay, the market stopped going up right where the wide volume has been. Then it went back down and tested the low part of this volume range. There is not a lot of resistance until we get back up to $60 if we break out of this range.
Secondly, look how important the $42 level is. After being support for most of 2015, it became resistance on the way back up off the lows. That level coincided with the 200 DMA and stopped the rise in March. After breaking through it in May, it became the new support level. The 200 DMA is relatively close and has now gone flat after being in a steep downtrend. Having the market go below both the 200 DMA and this $42 support was an important test for the price. It has now rallied above both showing that to be a false breakdown. It has also broken the downward trendline from $51 to $45.
I'll be covering off a lot more about the big picture in crude oil on The Commodities Countdown Webinar 2016-08-18. If this rally continues, this is one of the best entry areas on the chart. If Oil can continue to move up through the fall and into spring to get back to $75, most of the oil stocks will have huge gains to be made. As many have cut their operating costs dramatically, the potential to make some serious profits on an oil rally is significant.
Many people believe there is a big giant bear market forever engulfing the globe. Martin Pring and I will be doing a live webinar from Martin's office in Florida on Tuesday, August 23rd. I will be flying down to work side by side with Martin for this special event. We have a massive global thesis about how things are shaping up. If this works out, this will be one of the major turning points in the global economy. We will obviously discuss how to know when our conclusions might fail to work out. Quite frankly it should be a powerful hour with one of the world's best technicians. I encourage you to register here. Martin Pring / Greg Schnell Precipice Webinar 2016-08-23.
As well, I have a new chartlist that I will continue to update that holds current important charts. You can follow this link at any time to see the latest charts. Commodities Countdown Important Charts ChartList!
Lastly, register for Chartcon 2016! It is only a month away!
Greg Schnell, CMT, MFTA.