Tuesday, April 27, 2010

Crude Oil Intraday Bias is Flipped Back to the Downside

Crude oil's sharp fall from 85.63 dragged 4 hours MACD below signal line and suggests that recovery from 80.53 has completed. Intraday bias is flipped back to the downside and deeper fall should be seen towards 38.2% retracement of 69.50 to 87.09 at 80.37 or further to 100% projection of 87.09 to 80.53 from 85.63 at 79.07. On the upside, above 85.63 will bring another rise to retest 87.09 high. But after all, sustained break there is needed to confirm rally resumption. Otherwise, another fall would still be seen before consolidation from 87.09 concludes.

In the bigger picture, medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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