Oil price is giving a useful trading signal
With his previous forecast now achieved, independent analyst Alistair Strang has another look at the black stuff which is currently doing something that's hard to explain.
7th March 2024 07:45
by Alistair Strang from Trends and Targets
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Unfortunately, it’s time to once again give a lesson about charts. And with this one, we’ve considerable difficulty in comprehending the logic behind it.
The story kicks off with our previous review against Brent in November last year, where we provided a scenario for a drop to $72.36. This feat was successfully accomplished on 13 December, yet the rest of the dire warnings we’d provided are increasingly difficult to justify.
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The problem, obviously, is twofold, so we’ll give three arguments...
Firstly, Brent did not break below our drop target. Secondly, the value of Brent managed to bounce above the level of trend break on the Red line, roughly $79. And third is the stinker, the price of Brent crude is carefully walking up the Red trend line.
Quite why this third type of behaviour occurs is beyond us; we’re unable to imagine any trading mindset which would potentially promote such movement. But it is happening and also provides what can be quite a useful trading signal, due to us no longer being confident the value of the black stuff is still trading in a zone where a future $57 should provide a logical bottom.
Quite the converse is the usual outcome with this series of dance steps as, after all, the only sensible conclusion we should draw being that our original uptrend was wrong.
However, there’s often a grand gesture made when a price starts “walking up” a prior trend, a big thank you to those traders jealously defending short positions as they’ve been expecting a tumble for the last three months since the original trend break.
Quite when it shall occur is obviously open to the ‘slings and arrows of outrageous fortune’ and in this instance, the reference from Hamlet to weapons of war is probably apt, given the state of world conflicts. It’s almost like the oil market is just waiting for the right excuse.
Source: Trends and Targets. Past performance is not a guide to future performance.
Currently trading around $82.69, above $84.25 looks capable of triggering price movement to an initial $88 with our secondary, if bettered, a perfectly sane looking $93.20.
The “problem” is that such movements start to occur comes with the price of Brent moving into a cycle where we can easily imagine a third level target of $111.
For now, we’ve no confidence remaining in the Red uptrend and suspect Brent now needs to drip below $75 to provoke trouble in the fashion of reversal to an initial $71 with secondary, if broken, at $69.3 and a probable bounce.
Source: Trends and Targets. Past performance is not a guide to future performance.
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.
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