Crude oil has hit our first technical target for this correction and may trade in a range for the next few weeks, writes Al Brooks.
Crude oil began a correction from a four-month buy climax. It is testing support around $60, and it will probably be in a trading range for several weeks (see chart).
Since the December low, I have been writing every week that crude oil would likely continue at least a little higher.
In mid-April, I changed and said that it would probably soon reverse down for at least several weeks. This was because the April 18 tight trading range was a good candidate for a Final Bull Flag. Also, there was an important measured move target just above $66. I said that a reasonable first target was the March 21 high of $60.50. That was the most recent breakout point, and it is still a good minimum objective for the selloff.
Where is support?
When there is a reversal down from a buy climax, the bull trend typically evolves into a trading range. Traders should expect that for at least a few weeks. It could last a couple months. The bears are just probing for support.
Traders are deciding where the bottom of the trading range will be. The first leg down will probably end around $60, but it could be at any of the 2019 higher lows. There will then probably be a bull leg in the trading range. Traders should expect at least two to three legs before there is a breakout up or down.
The entire 2019 rally is a spike and channel bull trend. The spike began with the December low and ended with the Jan. 11 high. Once there was a pullback, the channel began. That pullback was the Jan. 14 low. Ultimately, that is a target for the bears, but they may not reach it for many months.
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