- New Science in old markets -

Crude rallies but fails at compression resistance

Crude oil has been in a down trend since the highs of late August, when we advised selling out of previously recommended long positions (in the August 28th edition) at the high point then also selling short in the September 4th edition. Our particular advice was to choose Rbob as the best available short but any of the other main petroleum-derived energy contractswould also be suitable – not natural gas in other words.

We advised staying short in the September 23rd edition after a new compression formed in crude oil and broke downwards and there has now been a bounce back up to that same compression:

Regular readers will know that this is typically where we expect to find resistance in downtrends – at the level of recent compressions that have already broken down. This is described in our user-guide in the first text box on page 7, where we describe 'return movements'.

These identifiable contra-trend moves can appear in both up and down trends and are an important feature of our analysis. There is another example in this chart from mid-June, when prices compressed for a few days, moved up and then dipped back to re-visit the levels of those compressions. This was a second chance to buy just as today's failure was another chance to sell.

More soon.