How Low Can Oil Go?

 | Jun 04, 2018 | 2:00 PM EDT
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Kudos to Carley Garner, who suggested that Crude was ready to top a couple of weeks ago. I had timing work that coordinated with her analysis then also. How low can it go though? That is the question you are probably asking.

Now I'm NOT going to tell you that Crude will definitely be putting in a LOW early this week, but I AM going to make a case to anticipate that possibility. Let's start with the futures chart of July crude oil. The recent decline in Crude is now similar to some of the prior declines within the larger uptrend in Crude. It is similar not only in PRICE but there are also some similarities in the time of prior declines, before this market had turned back up in the past. The timing on the crude chart is illustrated with the pink histogram below the chart. This histogram tells us that there is a confluence of timing parameters coming together around the 6/2-6/4 time window.

When we see a confluence like this, about 65% of the time we see at least a short term reversal of whatever the market is doing into the cluster of cycles (plus or minus a day of the cycles). Roughly 35% of the time you won't see any change in trend. If you coordinate the higher odds bet with the discipline of waiting for a technical buy signal, this can definitely help you with your entries on both day trades and swing trades!

Besides the timing work that is suggesting a possible intermediate low in this market, I'm seeing at least three different price zones of support to stalk. They come in 64.87-65.10, 64.03-64.45, and then 62.98-63.33. The most ideal entry setup will occur if Crude oil trades a bit lower into one of these support zones that coordinates with the timing cycles, followed by a technical "trigger."

For those of you who don't trade Crude oil, let's look at the same setup via the (USO) or crude oil ETF.

If you look at USO, you will see a similar chart with a longer term bullish trend and some standout timing for a possible low. The calendar day timing histogram shows 6/4-6 in this case and the outright cycles you can see on the chart come in between 6/5-7. Also note that I have labeled a few of the prior swings down in time between 8-11 trading days which is very similar to the current decline of seven days so far. I've also calculated the standout zones of support in this ETF. So for the same reasons, I'm also looking for a possible intermediate low to develop in the USO.
Bottom line, I'm stalking both Crude and the USO for a possible intermediate low early this week. An initial buy trigger will be when I see the 8 ema cross above the 34 ema on the 15-minute chart, along with a pattern shift, which is essentially taking out a prior swing high. My initial risk can be defined below the low made prior to the buy trigger or below the price support cluster. Remember to be patient for a trigger as it is NOT unusual to see a spike down into the cycles before a reversal is seen.
(An earlier version of this column appeared at 10:45 a.m. ET on Real Money Pro, our premium site for active traders. Click here to get great columns like this from Jim Cramer, Doug Kass and other experts throughout the market day.)

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