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Aaron Lynch One of the strongest benefits of a swing chart is that it filters noise to make an informed decision. Now the Light Sweet Crude contract is a favourite of mine, and it has proved to be a volatile market, however, taking the broader view on a three day swing chart it is indicating a clear picture.
It's interesting when we talk about the fundamental issues behind oil price fluctuations, there are very real factors that can affect global economies, however there are also multitudes of opinions floating around currently. The most recent to register in my mind is that oil prices are going to $105 USD a barrel, as quoted by Goldman Sachs. his seems to have had the opposite effect in driving prices down, maybe something to be said for contrarian trading styles. So, in establishing an opinion on oil prices we can step back and take a look at one of Gann's favourite tools, the 3 day swing chart.
The chart below signals a pretty clear picture of what price action is doing. Since December last year we have seen continued higher tops and higher bottoms on the 3 day chart. The most recent upswing of $5.78 is far weaker than the three previous swings. We have also seen the first lower swing bottom form in the current bearish movement. The result is a definite pause in the Bull Run.
Chart 1
click chart for more detail So for many, the question may be where to from here? Well, I was watching for a pullback around March 12th and we did see a slight retreat. I think this current move is the real thing with a pullback required before the next move can begin. Gann talked about sections of a market in a similar way to Elliott's wave structure. A third leg up in the move, in my mind, is on the cards and this also ties in with the fundamental issues of supply and demand.
To where this market may find support before the next move it's important to look at history. The chart below highlights three previous areas where the 50% pressure point has proven to be very useful. All three areas circled in both bullish and bearish moves have found the 50% pressure point support or resistance.
Chart 2
click chart for more detail So, measuring the next 50% point we can measure the current range from the February low to the April top. There would also be merit in calculating the 50% of the December low.
Chart 3
click chart for more detail Watching this run down has two sides for me at the moment. The first is watching the 3 day swing chart if a lower swing top can be formed then the trend is down. The second is that if the market can move confidently through the 50% point we may see a longer push by the bears.
Good Trading
Aaron Lynch
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