how high can crude oil go?

8/7/2019 How High Can Crude Oil Go?

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Recent reaction to geopolitics lent support to NYMEX WTI

crude oil spiking to $103.41 per barrel last week. Major

media and news outlets have caught the how high will crude

oil go bug and talking heads have been throwing out prices

from the low $100s to $200 plus per barrel.

Listening to these forecasts can be treacherous. Many times

the pundits discuss prices without any accountability to their

listeners or responsibility if they are wrong.

Similar to the run up to almost $150 per barrel in 2008, many

people are scratching their heads and wondering what to think

how high might crude oil go?

Thats why it may be a good idea to take a look at what the

technicals are saying.

Generally, the technicals are good at pinpointing support and

resistance for the near term. Technicals can often accurately

predict market activity, at least for a few weeks to a month

or so. In the longer-term the technicals produce a realistic

idea of where the market can go and what levels are mostimportant.

Towards that end, this article examines the NYMEX Crude

Oil perpetual contract from a purely technical standpoint

using wave projections and retracements.

The perpetual contract is a rolling continuation chart of the

prompt month futures. The perpetual allows for a broad view

of historic prices to identify the key waves with which price

targets can be projected.

Waves are made up of three distinct pricing points that takeplace at various highs and lows. These three swings are

denoted by prices X, Y and Z.

For an up wave cycle X is the rst and lowest point, Y is the

swing high and Z is the pullback low after Y. For a down

wave cycle, X is the rst and highest swing, Y is the swing

low and Z is the pullback high following Y.

These three prices that make up a wave cycle can project

targets using what the Romans called the golden mean, or phi

( = 1.62) and derivatives of . The formula for a target is:

Z + (|X Y| * factor of ) for up targets

Z - (|X Y| * factor of ) for down targets

The factors of used in this analysis are 0.62 (1/), 1,

1.38 (1 + (1/)2), 1.62 () and 2.76 (1.38 * 2)

There is also one additional target called the trend terminus,

which is calculated by taking Y3/X2.

By looking at a combination of all the calculations for

numerous waves, specic targets emerge. Clusters of targets

identify crucial resistance and support and connections

among targets.

This is useful information because highly occurring wave

targets can then be compared to other technical factors such

as retracements, moving averages and trend lines.

Looking backward, lets review the major wave up from

$54.71 for the August 2008 contract when prices hit $147.27.

For this wave X = 57.61, Y = 96.44 and Z = 84.33. The math

for the 1.62 projection is: 84.33 + (|57.61 96.44| * 1.62) =

147.23

CLQ08 MAJOR WAVE UP TO $147.27

How High Can Crude Oil Go?What the Technicals Say

BY DEAN ROGERS, AP

MARCH 1, 201

Documento descargado en www.HidrocarburosBolivia


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So, this major wave met its 1.62 extension within 0.03% of

the actual $147.27 high.

Lets start the forecast by evaluating the rst waves up from

$9.75. For the wave $9.75 147.27 32, about $120 is the

0.62 projection.

MAJOR WAVES UP FROM $9.75

MIDSIZE WAVES UP FROM $32.4

X Y Z 120 165 220

9.75 147.27 32.4 0.62 1 1.38

X Y Z 120 148 220

32.4 87.15 64.24 1 1.62 2.76

This will be a critical level upon a move higher. Kases

proprietary research shows that once the 0.62 target has

been overcome, odds favor an extension to the 1 factor

target. In this case the 1 target is $165. So if prices break

above $120, at least $165 will become probable.

Above $165 the 1.38 target is $220. This is a price that

many in the industry have been talking about not only for

the past few years, but also increasingly over the past few

weeks. Because $220 is the 1.38 projection for the largest

wave on the chart it is an important upper target. Also, it is

conrmed by the technicals. This does not mean that $220

will be met, but rather that above $165 there is a reasonable

probability that $220 can be met.

That said, looking at one large wave up from a low that was

made in 1986 does not complete a solid forecast. Rather, a

combination of the waves leading up to the current $103.41

swing high must be examined to see how conuent each

target is.

The major wave up from $32.4 on a weekly perpetual chart is

$32.4 87.15 64.24. This wave already overcame its 0.62

projection of $98. So, there is a good chance this wave will

extend to its 1 projection, which is $120. Therefore, $120

is conuent as a connecting number from $32.4 to the earlier

wave from $9.75.

This same wave targets $148 as the 1.62 projection and

$220 as the 2.76 projection. So this wave not only shows

conuence at $120, but also at $220 with intermediate

resistance at $148.

Before the input from outside inuences, crude oil appeared

to be exhausted and was poised for a major downward

correction. Many waves up from $64.24 had indicated that

conuent resistance at $92.84 should have held.

With the spike to $103.41 positive factors prevailed, at least

for the short term, but this leads to the conclusion that as soon

as the panic is truly over, the negative technicals will again

take hold. Crude oil could then come back down resuming its

earlier downward correction.

Even so, the waves up from $64.24 to $103.41 also conrmeach of the targets discussed and will remain on the charts

unless there is an unexpected decline into the mid $60s or so

The upward wave projections for the rise from $64.24

conrm $120 is the most important target. Not only was $120

conuent for the waves up from $9.75 and $32.4, it is also a

major target for these waves as well.

The wave $64.24 82.97 70.76 has overcome its 1.62 target

of $101 and is poised to extend to the 2.76 target at $120.



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RECENT WAVES UP FROM $64.24

The wave $64.24 92.84 83.85 also targets $120 as the

1.38 projection and then connects to $165 as the 2.76

projection.

The $120 target is the 1.62 projection for the wave $70.76

92.84 83.85, which then connects to $148 as the 2.76

projection and $165 as the Y3/X2 projection.

The last wave, $83.85 103.41 95.62 shows the immediate

resistance that connects to $120 is $108. This is the 0.62projection for that wave, which in turn targets $120 as the

1.38 projection and $148 as the 2.76 projection.

Further conrmation of $120 is demonstrated by the

retracements of the move down from $147.27 to $32.4 where

it is the 78% retracement. This means that $120 is not only a

key wave target, but also a crucial retracement.

RETRACEMENTS TO $32.4

From: 130.0 147.27

78% 108.5 122.0

89% 119.3 134.6

The $108 target is also conrmed as the 78% retracement

from $130 to $32.4.

So with this analysis we have established that $120 is a key

barrier to higher prices.

April crude oil futures have already backed off somewhat

and settled below $100. Unless there is further inuence from

geopolitical events, oil will likely have a hard time again

overcoming $100 in the near term.

Because of this it is important to also look at how low oil can

fall.

There are very few major down waves from $103.41, but the

largest of these indicate a drop back below $94.0 will open

the wave for another attempt to hit $88.0 and lower. This is

because the wave $103.41 95.62 99.2 targets $94.0 as

the 0.62 projection. This is also the 1.38 projection for the

wave $99.2 96.17 98.45.

WAVES DOWN FROM $103.41

Once $94 is met, odds will favor an extension towards $88,

the 1.38 projection for the major wave down from $103.41.

Below $88 the next major target is $78, the 2.76 projection.

The $88 target is conuent for many of the retracements

of the various swing lows from $32.4 to $103.41. Most

important, it is the 21% retracement from $32.4. A minimal

retracement of the move up from $32.4 should hold $88, butbelow this look for $78 as the 38% retracement.

RETRACEMENTS TO $103.41

X Y Z 108 120 148 165

64.24 82.97 70.76 2.76

92.84 83.85 1.38 2.76

70.76 1.62 2.76 Y3/X2

83.85 103.41 95.62 0.62 1.38 2.76

X Y Z 94 88 78

103.41 95.62 99.2 0.62 1.38 2.76

99.2 96.17 98.45 1.38

From: 32.4 64.24 79.25 83.85

21% 88.5 95.2

38% 76.3 88.4 94.2

50% 67.9 83.8 91.3 93.6

62% 59.5 79.2 88.5 91.3

78% 48.0 72.9 84.6 88.2

89% 40.2 68.5 81.9 86.0



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COMPLIANCE STATEMENT AND DISCLAIMERhttp://www.kaseco.com/compliance.htm

Kase and Company, Inc. is a hedging and trading solutions rm primarily serving the corporate and institutional energy sector. Since 1992, Kase has provided

producers, consumers, and marketers of oil, natural gas, products and liquids with a range of support services in the form of rigorously tested Internet-based

hedging models, hedging analytics including Monte Carlo simulations, basis and calendar spread analysis, weekly forecasts on crude and gas, VaR, risk limit and

credit risk analysis and a range of custom consulting services. For traders in all markets Kase offers the statistically based StatWare charts and analytics. Kase also

offers ongoing market support, educational services, and custom policies and procedures.

Right now the technicals dont call for prices lower than $78

anytime soon. However, the next major targets are $68 and

$60, which are the 50% and 62% retracements, respectively.

In summary, the major waves up from $9.75, $32.4 and

$64.24 all show that $120 is the key resistance threshold.

It is the level that must be overcome for the connections to

be made to the $220 mark that so many in the industry havebeen discussing.

With the small decline in recent days, the technical are

indicating $100 will be difcult to overcome without new

outside input.

On the downside, a correction below $94 will open the way

for $88 and possibly an extension towards $78.

Overall, what can be taken from this analysis is that the

technicals do show good long-term potential for higher

prices, but it may take months and even years. In the shortrun, dont hold your breath.

However, the next time you hear the experts talking about

$220 prices for crude oil, you will know it has a solid basis in

technical analysis.

For more information on Kases forecasting, trading and

hedging services, give Dean a call at 505-237-1600, or email

[email protected].


how high can crude oil go?

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