Autochartist - Weekly Articles
Weekly discussion and analysis of chart patterns from our partners at Autochartist.
Weekly Commodities Update: US Light Crude
US crude oil futures are poised to move higher this week to further Friday’s strong gains. A steady sideways trend holding the $105-per-barrel level established near-term support and formed a ‘flag’ chart pattern in the process. Friday’s surge pushed through resistance, triggering a ‘buy’ signal on the Autochartist 240-minute chart.
The breakout from the flag appears to confirm that this will be a continuation pattern, meaning that the initial trend higher, which carried the market above $105 prior to the consolidation, will continue. The pattern proved very consistent over the 21 candles completed during its formation, and scores high across the board, with an overall quality ranking of nine bars. The ten-bar initial trend reading was a strong indication that the breakout would occur to the upside, and this was confirmed by the rally above the $107 resistance level.
The projected price target calls for a minimum move to $108.42 per barrel to complete. The minor setback going into Friday’s close appears to be a classic retest of the top of the flag, which allows traders to enter on Monday at, or near, the level of the initial breakout.
US light crude continues to severely lag behind the Brent crude oil futures, which are the predominant contract for the European oil market. With a nearly $20-per-barrel discount to Brent, the WTI futures are well positioned to rally. Even a steady price in the Brent contract is liable to encourage speculative buying in the US market, as it is perceived to be under-priced relative to the rest of the global oil market.
In the event that US crude cannot sustain the rally from the current level, major technical support remains at the bottom of the flag chart pattern near the $103-per-barrel level.
Weekly Forex Update: USD/SGD
USD/SGD continues to decline inside the triangle chart pattern identified by Autochartist on the four-hour charts. Autochartist rates the overall quality of this triangle at the five-bar level as a result of the low initial trend (rated at the three-bar level), above-average uniformity (six bars) and higher clarity (seven bars).
This chart pattern continues the overriding downtrend visible on the daily, weekly and the monthly USD/SGD charts. The top of this chart pattern (point A on the chart below) formed when the pair reversed down from the resistance at the price level 1.2700 (which had also previously reversed the pair down in the middle of February this year) coinciding with the 38.2% Fibonacci retracement of the preceding sharp daily downward price impulse from the December of last year (which broke through the support trend line of the preceding weekly upward correction). This preceding daily downward price impulse started when the pair failed to break up above (after a few unsuccessful attempts to do so) above the major resistance area lying at the intersection of the horizontal resistance 1.3100 and the 50% Fibonacci correction of the previous sharp weekly downward price impulse from May 2010 to July 2011, as well as the downward resistance trend line drawn from May 2010 (as is shown on the second chart below). USD/SGD is expected to fall further in the coming sessions.
The following weekly USD/SGD chart highlights the aforementioned technical price levels.
Weekly Index Update: Wall Street
On Friday, Wall Street completed an ABCD Fibonacci pattern, setting up the market for a retracement of the break from point C to point D. With the main trend down, this will be a counter-trend move, which could pay off if aggressive buyers shift the momentum to the upside.
The overall quality of the Fibonacci pattern is an average five bars. Time symmetry and clarity are also rated five bars. The time symmetry rating suggests that the time relationship between point A to point B, and point C to point D, is average. The clarity quality indicator measures the amount of market noise. Its five-bar rating means that the number of price gaps and price spikes are average. The four-bar price symmetry rating suggests that the Fibonacci relationship between the price break from point A to point B, compared to the price break from point C to point D, is slightly below average.
The ABCD Fibonacci pattern is called the ‘backbone’ of all Fibonacci patterns. This is because it is contained in all other Fibonacci patterns. It is easy to identify because of its lightning bolt pattern. With Wall Street topping at point C (or 13,225) then breaking to point D (or 13,001), traders should be anticipating a rally into the Fibonacci levels ranging from 13,086.56 to 13,363.44. A typical retracement reaches the 50% to 61.8% levels at 13,113 to 13,139.44 respectively. The short-term trading action, immediately after reaching point D, has already retraced 50%. Since momentum appears to be building toward the upside, traders should watch for a test of the 61.8% level on Monday. At this point, they must be able to read the momentum to determine whether the market is going to continue higher or reverse back down.
Disclaimer: the above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
