Crude Oil had been ambling in a sideways motion for much of this year before breaking down from that pattern earlier this month. This break created our Slammdunk sell signal and was further qualified by the day of the fall breaching our weekly Peak Energy support point. The chart highlights this move lower. The professional client platform (CQG) also has a variety of hieroglyphics appearing above and below bars that clients use to indicate up and down phases. These have extra power and calls to action when they appear at any of the horizontal lines that mark trues measurements of support and resistance. These codes cover divergence (arrows), accelerations and patterns (squares) and Step Trend Theory (diamonds).
Since that break lower price has begun to approach a major zone of support which represents weekly and monthly energy levels. This extends from 46.53 to 45.45. Professionals will wait to see if price reaches this area and one of the patterns appears. Limits of Range over multiple time frames are also a key element of our analysis via what we call the Range Relativity Study. Its basis comes from Range Deviation Pivots which have a multitude of applications covered in the book Trading Time published back in 2007. Range Relativity applies relationships between the limits of range over weekly, monthly, quarterly, semi-annual and annual data. The latter is the most important as it acts as magnet and target point. These two levels have now been added to the chart as dashed red lines. The key point is the fact that the lower annual target for crude oil lies directly within the weekly and monthly zone of support. This creates a very powerful area. Last year price twice went to the annual higher level (circled) and patterns emerged to create steep slides. It is the inverse set up now.
There is an obvious correlation between the behavior of stocks sensitive to the price of crude oil and oil itself, so therefore being safe in the knowledge of a potential reversal higher in crude oil, it is wise to be proactive and check various ETF’S and some individual stocks to see which ones would benefit the most. What we are looking for is a confluence of support points and a correlation with oil itself.
First up is Helmerich & Payne (HP). Whilst it has a general correlation to oil, its recent performance has been impressive posting only a small drop. The zone that extends from 57.70 to 56.19 is extremely powerful as it combines the annual target with weekly and monthly Energy based supports.
BP Prudhoe Bay Royalty Trust (BPT) is a pure Crude Oil play as it has a major stake in BP’s Alaskan reserves. It has held within a strong zone that represents weekly Energy and Expansion supports and the semi-annual target. It has just pushed out of this area. However, further down is a more powerful zone that extends 11.29 to 10.03.
The ETF XOP does not have a Range Relativity levels adjacent but does have a strong zone of weekly and monthly confluence nearby at 34.85 to 34.13.
Exxon Mobil (XOM) finds itself trapped within Energy and Expansion above and the annual target below, which has halted the slide.
Marathon Oil (MRO) has a powerful zone lower down from 12.36 to 11.01.
All of these are now on our watch list, which will be keeping a close eye on the price of crude oil itself.
Please note this is general advice from Trading Safely for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.