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Crude then and now

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To show the similarities between the 2008/2009 and 2016 crude oil bottoming patterns, our March 24th update included the monthly chart highlighted below:

Monthly crude oil chart



This monthly chart is updated today to show first, where crude oil’s volatility since Jan 2016 is ‘similar’ to the volatility that took place in crude oil at the Dec 2008/Feb 2009 bottom and second, where the sell-offs into the 2008/2009 and 2016 lows were also ‘very’ similar.  As shown above, at the 2008/2009 bottom crude oil was trading 78% below its July 2008 high ($147.27) and – at the 2016 bottom – crude oil  was trading 76.80% below its Aug 2008 high ($112.24);  or crude oils final attempt to break-out above the 112.00 price level.

When considering this ‘big picture’ monthly overview of these two corrections and their ‘high volatility’ bottoming patterns, it’s interesting to see how closely the 2016 daily chart pattern is currently ‘shadowing’ the earlier 2009 daily chart pattern (see charts below):  


With today’s break below the 55 day EMA (blue line - exponential moving average) May crude oil futures (first chart) are in a ‘similar’ position to where crude oil was trading on Mar 30, 2009 (second chart).  At that time, crude oil was also trading back below the 55 day EMA and note where today (April 1st) is designated as ‘day 1’ on the 2016 daily chart and Mar 30th is designated as ‘day 1’ on the 2009 daily chart.  If crude oil continues to ‘shadow’ the 2009 corrective pattern then today’s sell-off puts May crude oil within days of completing wave A’ of an A,B,C correction.  

The bottom line:  Whether or not the 1st Qtr. 2016 ‘lows’ prove to be the ‘final low’ for crude oil still remains to be seen.  However, for now we see the comparison between the 2009 and 2016 daily chart patterns suggesting crude oil is in the early stages of an A,B,C correction that could last into the third week of April.  Initial support is between 35.65/34.22 and only a weekly close below 34.22 would suggest a larger correction and a re-test of the February low (May contract – 30.67).  Only a daily close above the 18 Mar high (42.49) would change our outlook and suggest the correction is over and crude oil is heading up to test major resistance at the 13 month EMA (45.13).

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