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Trend Reversal in Oil

This past week GFC published an article describing the possibility of a significant bottom in the oil market.  As it turns out, market observers didn’t have to wait long for the bullish price activity to commence.  From it’s low of $37.73, oil rallied 20% and closed the week at 45.27 after reaching an intraday high on Friday of 45.87.   Keep in mind that percentages always look larger when prices break away from smaller bases.  Nevertheless, we perceive oil’s recent rise to be of significant importance. A variety of technical indicators (MACD, RSI indicating bullish divergence, and the imminent break of a 2-month resistance line)  foreshadowed the most recent rise in oil and it has indeed been quite forceful. GFC forecasted the possibility of a significant increase in oil when we wrote:

“..if oil is able to solidly close above this recent 2-month trendline, it would signal an opportunity to enter into a long position and bet on a retracement rally which should be rather sizeable considerable the scope of the decline”  -GFC’s Update on Oil’s Decline 8/26/15

As the fate of the market would have it, oil proceeded to break this trendline during the very next trading day and the bulls haven’t looked back since.  Here is an update chart depicting oil’s break of the trendline.

OIl Reversal

MACD is now clearly indicating oil is in a bullish trend.  Furthermore, on this weekly chart below , you can see that this past week, oil made a new low when it bottomed at $37.72 and closed the week substantially higher at $45.27 which has formed a bullish candlestick pattern on the weekly chart.

Oil Reversal 2

The fact that this candlestick is forming after a 5 wave elliot-wave decline implies that oil has significant room to rally in the weeks ahead.   Ultimately, prices have the potential to retest the wave 4 highs in the $60 handle before the upward.  Oil speculators should now officially consider the new trading environment in oil to be amicably bullish and remain long this new trend until changing market conditions signal otherwise.  The rapid rise of the last two days represents massive levels of short-covering which has naturally occurred at what appears to be the exhaustion of a 2-year decline.  GFC will update our readers when we believe the overall bearish trend is likely to resume.

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Phil Olson has been a devoted student of the financial markets since childhood. With over ten years worth of experience trading various investment products, he has developed an insightful way of discerning the price behavior of the market. His trading career took off when he proved to be on the correct side of the 2008 financial crisis by shorting stocks such as Lehman Brothers, Fannie Mae, and Freddie Mac. Since 2009, after capitalizing on the crisis-driven downdraft in financial stocks, he turned his attention to the foreign exchange market and became a successful currency trader. His extensive educational background in the areas of business and finance has afforded him the benefit of being able to apply two types of analysis (Technical & Fundamental) simultaneously to the market in order to identify high-probability trade opportunities. With his distinct and complementary approach to navigating the investment landscape, Phil became a trusted source for financial advice among his family, friends, and co-workers. Prior to partnering with Matthew to create GeoFront Capital, Phil Served as a Captain in the United States Air Force as a Contracting Officer responsible for authorizing, writing, and administering multi-billion-dollar contracts between the Air Force and the Aerospace Defense Industry. His successful experiences in handling large amounts of fiduciary responsibility on behalf of both Congress and the American tax-payer lend themselves well to the financial advisory services of GeoFront Capital.

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