This update will be short and sweet. Light sweet crude oil that is. Black gold. Texas tea. Well the first thing you know ole’ Jed’s a millionaire…

Okay, back to reality. I’m not sure what happened there but I was having a Beverly Hillbilly’s flashback.

I have previously written several times now about oil being “lower for longer”. Let’s check in on the oil charts and see how that scenario is playing out. I’m going to look at 2 long-term charts for light sweet crude oil futures.

Light Sweet Crude Oil Futures

This chart for light sweet crude oil futures is a 5 year monthly candlestick chart. Light sweet crude (LSC) broke through 2 of its significant overhead resistance areas from a price perspective, a bullish sign for the commodity.

The extent of the bullishness will be determined during the current pullback which appears to have started in May 2018. I’ve identified 3 support areas for the current pullback. Each pullback area has its own implications.

If LSC finds support in the upper gray shaded box over the next 3-5 months, it will be correcting the Bullish Impulse wave pattern that lead it to the $72 price level. The next move would be an upside breakout towards either the 100% or 161.8% Target Lines from the Fibonacci Extension Tool. It’s amazing to think that a breakout could push oil back to the $100 price range. A breakout would officially end my “lower for longer” mantra. A reversal at the upper gray shaded box would most likely require decreasing selling volume as the $55.23 area is reached.

But if oil prints a $55.23 during its pullback over the next 3-5 months, stay patient. Statistically, the chances that oil is going to re-test at least the $40 range is greatly increased. My “lower for longer” theory is continuing to play out. There would most likely be increasing selling volume as the $55.23 area is being reached. This would indicate a break of the support and push down to the middle or possibly the bottom gray shaded box.

LSC – 20 Year Chart

I left the markings from the chart above on this 20 year monthly candlestick chart to see how they fit into the “big picture” for oil. There is an important note on the chart that reiterates a key item to watch in the next couple of months.

The MACD Histogram currently shows decreasing buying momentum. Look for the MACD Histogram to show an increase in buying momentum on its monthly chart before thinking that the rebound is real.

Light Sweet Crude Oil Futures – Summary

The current pullback for light sweet crude oil will be very telling of its next move. The earliest rebound for oil still appears to be 3-5 months away at a minimum. If the pullback extends to one the middle or the lower gray shaded box, that time frame lengthens.

But monitoring the MACD Histogram on its long-term chart is a great way to monitor the current pullback. Determine where oil’s price is when the MACD Histogram starts trending upwards again itself.

I figure that most TSC members probably stay away from futures. So how do we use the above info? Possibly consider holding off on investing in oil refiners or other companies that use oil (think about plastics as one example).

One industry may be able to offer some insights as to where a rebound can be expected. The airlines industry. The price of oil and the share prices of airline companies are usually inverted. As oil prices rise, airline stocks usually go down.

Look for an update on airline stocks next. I want to see if there are any clues on their charts that may help with the oil support areas.

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