Oil breaks 20 day FLD and VTL as 20 week cycle emerges

Following on from the last post about Oil there has been some interesting developments. Price meandered lower for most of last week, actually breaking the previous low which I had assumed as the 20 week cycle trough. Then, late on Friday price shot up through the 20 day FLD and VTL in what is most probably a sign that the 20 week has infact bottomed later. Here is the chart:

CL 04-15_daily_31_01_2015However, measuring from the last 40 and 80 day cycle lows does bring into question the validity of this bounce. Both the 40 day and 80 day look a little long to me but nonetheless I am long on this break with a small position size. There are a few possibilities I am tracking:

  1. The trough break can still imply the 20 week cycle did infact bottom on the 12th of January and will be bearish in shape. If this is the case I don’t expect the peak on the 14th to be broken.
  2. The break up on Friday evening was infact the start of the 20 week cycle and we can expect a sharp move up followed by selloff and continued bear action after the peak of the first 80 day cycle. There was possibly a ‘double G-H’ interaction with the 20 day FLD which would explain this stretching, a sublety common in strong bear moves.

I think on balance option 2 is more probable. A break of the peak on the 14th and continued move up breaking the 80 day FLD and VTL would confirm the 20 week trough for me. The phasing analysis ‘trough and whiskers’ shows the 20 week range as covering both possible scenarios so next week will be crucial.

There is a chance the 80 day VTL or FLD will provide resistance. If the cycle timing is right when this happens, it could possibly be a chance to short for the continued move down.

As far as the long term picture goes I still believe there was an 18 month straddled trough back in September 2014 and Oil has further to fall. Nonetheless the beauty of trading with Hurst (and in particular the FLD trading strategy) is that you can be wrong about the magnitude of a trough but nearly always right about the direction!

A fellow Hurst trader, Derek, over at cyclicwave gives more thoughts on the progress of Oil. Well worth having a read.

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