LIGHT CRUDE OIL

While analyzing charts I try not to look for any reasoning behind the chart pattern and demand & supply relationship. I trust that the market knows what it is doing and the underlying reasoning so I follow the technical signals on the price chart. Light Crude Oil is another chart that I analyzed with the same discipline but closely in the past 5 years because of my presence in the middle east. Now I’m hoping that the bullish outlook for crude oil is due to global growth prospects and not any political tension. But again I’m leaving the reasoning aside and trying to understand what the chart is telling me. So far Light Crude Oil had perfect technical set-ups, first forming a double bottom reversal pattern between August and October then a “possible” inverted head and shoulder pattern. Inverted H&S pattern should be called complex head and shoulder because the head is actually a double bottom.

After all the technical jargon above let’s summarize this chart; 200 day moving average acted as a strong support at $93 levels in December. Any pullback should find support above $93 to continue the positive technical outlook. Strong support = $93. If this is an inverted H&S pattern, then we should expect a breakout above the neckline at $103.50 levels. A breakout above $103.50 will confirm the inverted H&S pattern and will target $115-$120 area. Strong resistance = $103.50. So far it has been a strong market for the energy sector and the bullish outlook remains intact.