A number of scenarios were proposed for crude’s movement, yet the barrier in defining the direction remains the $60 levels. This psychological barrier offers a wide trading range for oil, where we can see on the chart below that it managed to finish 38.2% correction for the steep downside around 78.00 and even managed to extend into 80 levels before resuming the decline.
GRUDE OIL - Annual Technical Analysis for 2010
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At first sight, we can see that trading was within the upside channel that was breached in the last trading month of 2009 which ignited negativity in direction and led crude to correct around 23.6% of the upside wave. At the same time, we can see that the downside wave has slowed noticeably after reaching the mentioned correction level around 71.00 and after slightly falling below 70 levels it managed to acquire new upside momentum. ADX is trying to point to the downside yet was incapable of confirm the direction while RSI reverse to the upside
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One of the scenarios suggest that within the upside wave oil traded in a DZ which formed the first part of a Flat Wave, which is the A wave. According to this scenario a downside wave should control 2010 trading targeting areas below 53, which is the 61.8% correction for the entire upside wave.
From another perspective, the analysis contradicts completely with this bearish preposition over the medium term, yet over the short term agrees on the bearish tendencies.
On the chart above we can see that the proposed scenario does not contradict with the previous one as the bearish wave is not unlikely reaching 64.00 to complete the downside B wave of the ZZ wave. After the completion of the B wave, crude will start a new IM wave targeting areas around 50% correction and maybe 61.8% for the grand decline from the historical high, and therefore the targets are around 91.55 and 104.75 per barrel.
We favor the second scenario for crude to enter a new bullish wave in 2010, yet it will only be confirmed and cancels the first proposed outlook as long as 64.00 confirm its strength and remains intact; after that trading can resume above 38.2% correction at 78.15. Those expectations are based on futures for January settlement and therefore take into consideration the price gap with the opening and closing of each new contract.
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