PUBLISHED BY INSTITUTIONAL ADVISORS
WEDNESDAY, OCTOBER 1, 2008
Technical observations of RossClark@shaw.ca
Following the weekly and monthly upside exhaustion alerts in June and early July Crude oil has stepped its way lower, pausing at the 34-day Bollinger Band, 100-day moving average, 200-day moving average and then turning up from the lower Keltner Band. The seasonal rally came late, as part of a short-squeeze in the expiring October futures contract. This has brought prices back to overhead resistance. Following the current rally it would be normal for prices to stage another test of the lower Keltner Band in the $87 to $90 range.
We’ve written about the Keltner Band in oil over the years. When crude oil prices exceed the upper band and then violate the 50-week average, support is found once the price declines to the level that the lower band was at while the market made its most recent high. The low is in place as of September 17th when oil generated a weekly RSI(14) reading of 36, right in line with the RSI’s seen in the eight previous examples (1987 through 2003). From there one can anticipate a rally lasting a maximum of six weeks (normally two to four weeks).
Crude has a tendency to double bottom and in the case of the Keltner Bands the test of the lows occur ten to eleven weeks later, giving us the next targeted bottom and buying opportunity around the first week of December.
All instances since 1987
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