Aaron Lynch
Aaron Lynch

Markets are moving and the haze that was 2011 is lifting. Trends start to emerge. As a specialist in crude oil, I see exciting times ahead as the globe renews its interest in this commodities powerhouse.

Oil is now a common topic of discussion around dinner tables as China slows for a soft landing and cases for resources booms and busts are argued. In the early 2000s oil awareness was limited. The availability of crude oil Futures and CFDs have made oil more approachable, even to new traders. I want to say a big ‘thank you’ to those who joined me for the Oil Webinar earlier this month. We covered a lot of ground and hopefully identified a few potentially profitable trades for the year ahead.

Chart 1 below includes some price and time aspects as well as what I believe is a valuable All-Time-Lows resistance card from the Number One Trading Plan plus some basic time analysis marking turns in the market.

The heavy orange lines are multiples of $9.75 of the All-Time-Low from 1986 on crude oil. The green dotted lines are 25% multiples of this low. You can see how often these price lines have been used as support and resistance. To add some time structure I have also marked changes in trend and displayed the dates when these occurred.

The early part of each month (i.e. the first week) has been significant in calling turns. This is a change of beat for crude, which has seasonally changed trend around the expiry dates of contracts, or nearer the middle of the month. The All-Time-Low formed on 1 April, 1986, so you can understand why that might be an important date to watch this year.

Chart1 – Daily Bar Chart CL-Spot1

click chart to enlarge

Chart 2 focuses on some balancing of time to assist us with the early-March top. I have ‘balanced time’ using the major range of 2011 and the bottom-to-bottom time frame from October to December, 2011.

The 155- and 76-day time frames are always worth watching and these gave us a guide that the early-March period was likely to produce some market activity.

Chart2 – Daily Bar Chart CL-Spot1

click chart to enlarge

So will the market rally or fall? Whatever the answer, a sound trading plan and a system will make all the difference. I have included a Gann Angle from the October, 2011 low and if the market remains comfortably below this level (as the ABC short trade has just triggered), then some downside may follow.

As always a swing chart will keep you safer when choosing a direction. Chart 3 shows the one-day swing chart confirming a down trend, with expanding downside and contracting upside ranges.

Chart – Daily Swing Chart CL-Spot1

click chart to enlarge

With the U.S. dollar gaining strength, commodities could face some pressure against a backdrop of failing demand. The months of March, April and May all bring traditional trading opportunities, so stay focused. This market is set to deliver for those who are ahead of the curve.

Good Trading

Aaron Lynch