SINGAPORE: Brent oil may revisit its Dec. 26, 2018 low of $49.93 per barrel in next quarter, as suggested by its wave pattern and a Fibonacci ratio analysis.
The bounce from this low was driven by a wave B, the second wave of a three-wave cycle from the Oct. 3, 2018 high of $86.74. This wave is expected to be deeply or totally reversed by the current wave C which started at $75.60.
A projection analysis suggests that the wave C is capable of travelling into a range of $38.79-$52.85, formed by its 100% and 61.8% projection levels.
The preceding bigger cycle from $27.10 adopted a corrective wave mode as well. This characteristic suggests that the uptrend from $49.93 could hardly extend above $75.60. The cycle took 698 trading days to complete. The current cycle lasted less than 200 days, which looks too short to complete.
The bounce from the June 5 low of $59.45 may extend into a resistance zone of $66.91-$70.23 before the downtrend resumes. The range is formed by the 23.6% and the 14.6% projection levels of the wave C and pointed by a falling trendline.
A further gain above $72.66, the 23.6% retracement of the uptrend from $27.10 to $86.74 could signal an extension of the uptrend towards $86.74.
The rise from $49.93 on the weekly chart looks like a pullback towards a rising trendline. The pullback was overdone. A retracement analysis on the uptrend from $49.93 to $75.60 reveals a support at $59.74, the 61.8% level, which caused the second pullback.
This second pullback is expected to be much shorter and weaker than the first one, probably to end around $69.54, which is near $70.23 (first chart). Strategically, a break below $59.74 could confirm the continuation of the wave C towards $49.93.
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** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own.
No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses. **
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