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Are Crude Oil Prices Oversold? Here's How to Find the Answer to This Question
EWI's Energy Specialty Service's latest daily and intraday analysis shows you whether the May selloff has run its course
By Nico Isaac
Fri, 18 May 2012 16:45:00 ET
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Since the start of May -- in just 3 weeks! -- crude oil prices have fallen 12% to land at their lowest level in 6 months. Great time to be an oil bear for sure, but now oil bears want to know whether their gravy train has reached its destination.

Well, according to the mainstream experts, the answer to that question is a very confident Yes... and, an equally confident No -- as the recent contradictory news items below make plain:
 
  • Bearish -- Crude's bearish tank is still full:
"Oil prices are caught in a three-way squeeze between a strong US dollar, a weak economy, and Saudi Arabia's incessant assurances that the energy market will be amply supplied; there's only one way for oil prices to go: Down." (May 16)
 
  • No, wait, bullish -- Crude's bearish tank is nearing empty:
"Don't completely give up on oil just yet. There are still some potential price lifting factors lurking in the backdrop... The floor on oil prices may not be too far below current levels." (May 18)
 
Elliott wave analysis helps you cut though such ambiguity. See, instead of looking at countless, ever-changing "fundamentals," it examines the internal measures of a market's trend: namely, the Elliott wave structures in price charts combined with technical indicators such as the Relative Strength Index (RSI).
 
It is from this solid foundation that EWI's Energy Specialty Service set the stage for crude oil's May retreat. To be sure, Energy Specialty Service had bullish expectations for oil -- but only as long as the price stayed above a key level: $101.82.
 
When oil broke below $101.82 on May 4, that turned the trend solidly down from an Elliott perspective. Energy Specialty Service editor Steven Craig prepared subscribers for a bearish outcome several days in advance:
 
May 2: "At this point, trade below 101.82 won't bode well for the idea that the decline from the early March peak is done… and an even longer decline would seem likely."
 
May 3: "The market’s failure to extend the advance argues for the alternate count… A much deeper decline should lie ahead."
 
Crude oil's 12% drop since then fits the "deeper decline" call to a "T." This brings us back to our original question: Has the oil bear's gravy train reached its final destination?
 
Well, on May 18 Energy Specialty Service intraday analysis of crude oil presented the following chart of oil prices versus two key momentum indicators: RSI and a standard Oscillator.  
 
 
 
One look at this original chart (posted inside the Service right now) and a consistent pattern jumps right off the page: Extreme high readings of RSI and Osc have signaled important peaks before, while extreme low readings have coincided with bottoms.
 
Right now, Energy Specialty Service's original chart fills in the blanks and tells you what momentum indicators are suggesting for the price today.
 
EWI's Energy Specialty Service has managed to stay one step in front of crude oil's near-term trend change. Subscribe today, and you can too.
 
EWI's Energy Specialty Service helps you make smarter trading decisions with timely updates and expert Elliott wave insights you won't find anywhere else. 
 
Editor and 30-year energy market veteran Steven Craig lives and breathes these markets all day, every day. Get his actionable forecasts for crude oil, nat. gas and other global energy markets now.
  

 

Tags: crude oil, Elliott wave, Elliott Wave trading, fundamental analysis, oscillators, Relative Strength Index (RSI), technical indicators
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