Crude Oil Technical Analysis – 16 April 2013
Weekly Perspective for Crude Oil
This is a technical analysis of crude oil using Elliott Wave Analysis. The crude oil price has been forming a contracting triangle (in amber) in the weekly chart as shown below. This contracting triangle has been in place since June 2010. Contracting triangles can break either side (to the top or bottom). We can only confirm the direction once the price has broken out of the triangle.
On the longer term view, should the crude oil price break out to the top side, the target prices are USD 128 and USD 145. This is based on the Fibonacci relationships as well as the measured move using the widest part of the triangle. On the other hand, a break to the downside will give a crude oil price target of USD 36.
Contracting Triangles are normally made up of five sub waves. In the case of crude oil, it appears that there are enough sub waves in place and it is likely that the final sub wave is in progress. A break out of the contracting triangle is likely to take place soon.
Daily Chart for Crude Oil
Next, we zoom into the daily chart for crude oil. Here too, we can see that another contracting triangle has been forming on the daily chart. This contracting triangle has broken to the downside. Based on the measured move method, we get a target price for crude oil at USD 69. One of the characteristics of contracting triangle is that once the price breaks out, it normally results in a vigorous move. The nature of contracting triangles is to pause the bigger trend and move the price sideways. It normally takes its time to pan out. Once it is complete, the previous trend will continue and it will result in a strong move.
This can be seen here as well. The crude oil price has started to slide vigorously to the downside once the price broke out of the triangle. The bottom line of the larger contracting triangle would likely provide support at USD 81.50 region.