Saturday, June 11, 2011

Crude poised to break from triangle

CL


After breaking down from the ending diagonal pattern with a sharp $20 move as wave A, Crude Oil appears to have formed triangle wave B.

Triangles are continuation patterns so CL seems ready to break down in a sharp C wave thrust out of the triangle. The projected move is shown in red.

The initial thrust is expected equal to the width of the triangle so this would take the price down to the H&S neckline. From here wave C is expected to continue to the $82-$84 area, which is the H&S target, where wave C = wave A.

An alternate count is shown in blue. The triangle could be a 'b' sub-wave of a larger B wave. In this case it would break upwards to around $107 which would be a 61.8% retracement of wave A. It would then break down to around $87 (H&S target, C = A) or carry further to 1.618 x A.

So wait for a clear breakout from the triangle to see which pattern is playing out before taking the trade.

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