SINGAPORE: Brent oil may break a resistance at $53.20 per barrel, and rise more towards the next resistance at $59.96 over the next quarter, following the completion of a five-wave cycle.
The cycle started at the Aug. 28, 2013 high of $117.34 and ended at the Aug. 24, 2015 low of $42.23. A Fibonacci retracement analysis on the cycle reveals a target at $70.92, the 38.2 percent level, which is close to the peak of the fourth wave at $69.63, the May 6 high.
However, this target could be too aggressive, a more realistic target will be $59.96, the 23.6 percent level, which will be confirmed when oil breaks the nearest resistance at $53.20, the 14.6 percent level.
The third wave of the cycle, the wave 3, is much longer than both the first wave labelled 1 and the fifth wave labelled 5. Such a relation suggests the wave 5 could hardly extend.
It seems oil has managed to stabilize around a support at $47.49, the 7 percent retracement. Chances are it could test the resistance at $53.20 very soon. It failed to overcome this barrier at the first attempt, but may succeed at the second attempt.
The momentum and the duration of the rally from 42.23 strongly indicate a reversal of the downtrend and the bullish divergence on the weekly RSI simply suggests a decent rally is due.
The $42.23 level could be approached should oil drop below the Sept. 15 low of $45.98.
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