Oil Price Channel

Oil is Working its Way Neatly Down the Blue Price Channel

Oil is Working its Way Neatly Down the Blue Price Channel

Oil is working its way neatly down the blue price channel. It’s either maxing out the channel waves before starting a megaphone bottom (green scenario) or its in the middle of a falling wedge (purple) or falling megaphone (orange) bottom already.

We’ll know which it is by when it first breaks the channel top.

Oil's Next Move Could Be to the Orange Megaphone Top or Oil Could Return to VWAP at 50 and Start a New Megaphone There

Oil’s Next Move Could Be to the Orange Megaphone Top or Oil Could Return to VWAP at 50 and Start a New Megaphone There

Oil has already done its job of confirming the orange megaphone by taking out the August 2, 2016 low.  It’s next move could go all the way for the orange megaphone top.  But oil could also return to the orange megaphone VWAP at 50 and start a new megaphone there.

If oil is going to go for the orange megaphone top, it will likely attempt a megaphone across 50 that breaks out in a Sornette melt-up set-up without a retrace to VWAP.

A series of megaphones inside megaphones across 50 would imply that oil is turning the inverse head and shoulders on the chart into either an inverse head and shoulders with a triangle right shoulder or a large triangle that will eventually break out downwards.

The inverse H&S with a triangle right shoulder is more likely, and would lead to a large move up on breakout.

Long-Term Neely Set-Up on X

X's Crash, Partial Retrace, and Return to Crash Low is a Neely Set-Up for a Big Move Up

X’s Crash, Partial Retrace, and Return to Crash Low is a Neely Set-Up for a Big Move Up

X is trying to put in an island bottom just below VWAP of the purple megaphone.  A breakout from that island bottom through VWAP would set up a move to the megaphone top.

After a stab at VWAP from the top, a breakout from the purple megaphone would target roughly the all-time high, depending on exactly how long it takes for everything to play out.

The long-term chart is also one of my favorite Neely set-ups–a crash, followed by a partial retrace and extended topping, followed by a return to the crash low.  Next target tends to be the pre-crash high.

X Appears to be Putting in a Beautiful Rounded Bottom Just Below Its Gap Down and Purple Megaphone VWAP

X Appears to be Putting in a Beautiful Rounded Island Bottom Just Below Its Gap Down and Purple Megaphone VWAP

Potential Oil Price Channel

A New Channel Low Would Confirm the Red Price Channel

A New Channel Low Would Confirm the Red Price Channel

Oil is trying to confirm a new price channel (red in chart above). If the channel confirms, oil will be in its critical decision wave for starting a bottom vs breaking out into a melt-down.

Oil Inverse Head and Shoulders with Megaphone Right Shoulder

Oil Inverse Head and Shoulders with Megaphone Right Shoulder

The green and purple scenarios would be pretty much the same as in this daily chart from a few days ago.  The green scenario could bog down at the red megaphone VWAP to form a triangle right shoulder instead of heading straight up through VWAP to the megaphone top.

The longer oil is stuck moving across 50, the bigger the potential move after it finally breaks out.  There’s a long-term Neely set-up for a move back to oil’s all-time high so I expect the churning across 50 to last a while.

XLE Megaphones with Potential Melt-Up Set-Up

XLE has a Potential Sornette Melt-Up Set-Up on its 60-Minute Chart

XLE has a Potential Sornette Melt-Up Set-Up on its 60-Minute Chart

XLE has formed a beautiful megaphone inside a megaphone on its 60-minute chart.  Even better, XLE has formed a potential Sornette melt-up launch pattern across VWAP of the red megaphone.

An upwards breakout through the navy blue megaphone VWAP, typically with a double bobble as the orange megaphone fails to retrace to VWAP, would target the red and blue megaphone tops.  The move would usually be fast (green scenario).

The light blue scenario represents a series of megaphones inside megaphones across the navy megaphone VWAP.  We’d usually see this is a triangle right shoulder is forming on the potential inverse head and shoulders bottom on the daily chart (see below).

The purple scenario represents a top before a collapse back to the 2016 (see below).

 

XLE Inverse H&S Bottom with Right  Shoulder Triangle vs Neely Set-Up

XLE Inverse H&S Bottom with Right Shoulder Triangle vs Neely Set-Up

XLE formed a price channel on its move down from the June 2014 high to the January 2016 low.  That kind of move is a Neely set-up for a partial retrace then retest of the low before a melt-up back to the all-time high (purple scenario).

The green scenario on the daily chart is a triangle right shoulder on the inverse H&S before a breakout to retest the all-time high.  It’s possible but unlike (because of the megaphones on the 60-minute chart) that XLE will break out of that inverse H&S without a triangle right shoulder.

The Neely set-up is the favorite longer-term.