OIL

Oil again

Hamilton

oil march 1 2016 boil march 1 2016 s

Oil’s rebound has been rather lethargic despite seemingly large percentages. This opens the possibility that we are not yet at the bottom. Of course our longer term view was that we should go lower, maybe a year from now and not necessarily immediately. See our previous blogs.  The A-B-C correction for oil, shown on the left, calls for a price in the vicinity of $10 if and when the C leg equals the A, a common occurrence.

Shorter term we may be making a sideways triangle, the market’s way of killing time. That should then lead to another wave down which may reach those targets. This is just a possibility!

OIL

Hamilton

oil jan 20 2016

Unlike the Bank of Canada we have no idea how low oil might  go. Not too long ago they had no idea but now, all of a sudden they are confident it will trade at about $36 on average for the remainder of 2016. At least we have been pretty accurate with our predictions.

Where we are now it is hard to fathom . All we do know is that the 4th of previous degree, not that long ago in 1998 or so, is around $11. Furthermore the 5th wave in commodities unlike equities is often the longest. On top of that we still are of the opinion that a 4 and 5 are still required. In short, do not believe anything you hear on TV from experts that never dreamed that oil could  possible go below $80 or so.

Wave 5 would be equal to 3 at about $25. After that there is little else than that 4th wave of previous degree at $11 to guide us.

Tonight the futures roll-over with the front month becoming March instead of February. Due to contango, there will be a price increase of about a dollar due to the downward slope.

Oil and RDS.B

Hamilton

The usual then, August 8, 2015, and now charts;

OIL aug 6 2015oil jan 10 2016 b

 

Since August oil has dropped from, roughly, $45 to $33 or about another $12. As you can see, now the A and C legs are vector equal as today’s low is on the circle that we had drawn back then. Despite that we are not at all certain that this is the bottom as there still appears to be a wave down missing. Theoretically we could solve that problem by assuming that there was a triangle B wave to begin with. It looks absolutely awful so we do not give it much weight, but still it remains a possibility that we will still get the missing waves 4 and 5 and therefore it could drop even lower to $11,23. But that is something we would not bet on at this stage.

We can show the missing waves 4 and 5 perhaps more clearly using futures;

crude oil fut jan 10 2016

So all though we have the requisite 9 waves to make a full sequence for wave C down, the count looks weird, particularly the second wave 2 which takes two full years to unfold. It might be possible that we will still get a very elongated wave 4 followed by a slightly lower low years from now.

Royal Dutch tells us the same story. We are as low as we need to go, but could still go a little lower;

rds.b jan 10 2016 brds.b jan 10 2016 s

Again we are not sure which top is THE top but our preference is the first as this fits better with the rest of the world. In that event the recent wave C down should unfold in 5 waves. It is possible that we have that but a further drop to about $34 would be reasonable should de stock want to retrace 61%. With a yield of 9.5%, which no doubt will be reduced, this stock is now definitely in the buy, not sell category.