Chart Advisor: Examining Oil Targets

By Ryan Gorman, CFA, CMT, BFA

1/ A Daily Look at Oil

2/ A Weekly Look at S&P 500

3/ An Hourly Look at Nasdaq 100

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1/ A Daily Look at Oil

Today is my final piece and I wanted to do something a bit different. There are a lot of different strategies and time frames. I mentioned finding what works for you and sticking with it! We have spoken about trend and momentum, support and resistance this week. These things keep you in gear with the markets.

I have found some pattern recognition really interesting. During my Chartered Market Technician studies, I learned about Elliot Wave. The idea of structure to the market was fascinating to me. I was never able to learn it well enough to use it effectively. However, I came across the book Trade What You See by Larry Pesavento. In this book he talks a lot about different patterns, one of which is ABCD. The AB move is comparable in size to the CD move and the correction move BC is often some Fibonacci ratios. 38.2%, 50% or 61.8%. Nothing works all the time, but what I like about this is that there are clear spots to know when something else is happening.

Here we see a daily chart of oil. There was a bullish ABCD move from the December low around 68.27. 78.62 was an extension target. The actual high was 79.43, so far from perfect but a reversal did come that retraced half the move. The small ABCD was an AB move of a larger formation. The AB=CD target would be 84.73. You could use a move below the recent pivot as a stop or you could use the 61.8% level around 72.79.  If you used the 61.8% level you would risk around $2.40. If the target is hit at 84.73 you make $9.55. This is almost a 4-1 risk to reward ratio.

2/ A Weekly Look at S&P 500

The nice thing about technical analysis, including pattern recognition is that it does not matter the instrument or the time frame. The patterns are the same.

Here is a weekly chart of the S&P 500 futures. There has been a big of an overshoot, but there could be a turn. How a correction behaves would help us know if there is still a bullish trend or a trend change. A first target would be a 38.2% retracement of the move off the October low, this is around 4650. This would be a normal and healthy correction. How it unfolds would tell us more about what may be happening, but one step at a time!

3/ An Hourly Look at Nasdaq 100

On shorter timeframes you have more patterns to view. I wanted to show this one as it develops in real time. We have 2 ways it could play out.

The low on the 17th of January to the high on the 24th corrected 50% of the move to the Wednesday low. This could be a correction that targets the upside of around 444.13!

Alternatively, there was an ABCD up from the low on Wednesday the 31st that could be completing as the upward correction that would target a move down to 410.73.

I hope you have found this as interesting as I have. While targets and patterns can be done many ways, I have liked these tools as well as how it can be turned into a formal trading plan.

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Originally posted 2nd February 2024