The last time we checked on the charts of Crude Oil, WTI oil futures to be more specific, was in early February, writing that "I do not see the technical evidence to convince me that an important top has been put in on oil prices. I would look for oil futures to start to stabilize in the short-term and rally in the second half of February."
The price of crude oil did bottom and turn higher in February. We also looked at prices back in June of last year when the rally began.
Prices have made new highs for the move up today in reaction to fears of reduced availability from Iran. Economics 101. Also, I see some analysts leap-frogging forecasts. What is that?
You read about someone calling for $75/bbl., then someone else comes out with an $80 forecast until another analyst jumps in with $100 and then $111 from yet another pundit. Get the picture? The last time I remember forecasters wearing rose colored glasses was when oil topped out around $147. Experts were looking for $150, $175 and even $200 per barrel. Leap-frogging.
Title of this column is to look to be a seller when everyone wants to be a buyer. Understood?
In this chart of the June 2018 Crude Oil futures, below, we can see an uptrend going back to early 2017. Prices are above two short-term averages - the 20-day simple moving average line and the 50-day moving average line.
In the lower panel of this chart is the 20-day momentum study. This indicator shows higher highs for momentum as prices make higher highs. After the recent new momentum high in April we are likely to see a lower high being made even as prices push still higher. This will be a bearish divergence and could foreshadow lower prices ahead.
A bearish divergence could be the "heads up" signal to reduce long expose in the energy space.
In this second chart of Crude Oil, below, I have used monthly candle "bars" and put in a cycle measure along the bottom. The current cycle from June of 2017 should be peaking soon and then decline into the fall. I can also see a pattern of "8 record highs" over the past nine months.
I would be on alert for a reversal pattern.
In this Point and Figure chart, below, was created using a continuation futures contract - linking up the nearby futures by rolling into the next month before the current month expires. A price target of $74.71 is being shown. In a bullish environment it is not unusual for price targets to be overshot.
Bottom line: Crude oil is still in an uptrend without the help of a weak U.S. dollar. Prices are getting extended above longer-term moving averages and the trend line from the early 2017 low. Sentiment is getting frothy just as I anticipate that time cycles could be turning down later this month.
Futures traders may want to think about becoming scale-up sellers and investors who are long energy stocks will want to watch for a loss of price momentum