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Analysis: Looking for Some Sort of Reversal in Crude Next Week

Analysis: Looking for Some Sort of Reversal in Crude Next Week

Kristian Kerr, Sr. Currency Strategist

Talking Points

  • Key cyclical turning point next week
  • Waiting for sentiment to turn more lopsided

Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.

The first half of next week looks potentially important for Crude from a time cycle perspective. Several short and longer-term cyclical methods converge around this time which suggests to us that the commodity is vulnerable to a reversal. Given the rather persistent grind higher over the past few weeks we favor some kind of top. A key variable we look for around these windows is an extreme in sentiment. One of our favorite metrics for gauging this is the Daily Sentiment Index or DSI which is a daily survey of short-term futures traders. As of Wednesday’s close, DSI was only around 77% bulls. Before trying to fade such a strong trend we will look for DSI to get closer to 85% bulls and price to at least test resistance near $105.00.

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Crude Chart: May 22, 2014

Analysis: Looking for Some Sort of Reversal in Crude Next Week

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk Next Week:

Analysis: Looking for Some Sort of Reversal in Crude Next Week

LEVELS TO WATCH

Resistance: 104.20 (Fibonacci), 104.90 (Gann)

Support: 102.85 (Gann), 102.05 (Fibonacci

Strategy: Sell (FXCM) USOil early next week.

Entry:Sell USOil on the first daily down close next week

Stop: No more than 1% above entry.

Target: 101.75

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES