SINGAPORE: Brent oil may test a support at $100.21 per barrel over the next three months, with a good chance of breaking below this level and falling more towards $94.92.
Oil is riding on a three-wave cycle that developed from the March 2012 high of $128.40. The third wave of the cycle, the wave (C), could be broken down into three small waves labelled A, B, C.
The wave C is capable of travelling to $94.92, its 100 percent Fibonacci projection level, based on the length of the wave A that fell from the March 2012 high of $128.40 to the April 2013 low of $96.75.
The projection analysis also reveals that the support around the 61.8 percent level of $103.48 has triggered a rebound, which could have ended at $112.39, the March 3 high, near the resistance at $112.05, the 23.6 percent level.
With oil approaching the support again, chances are it may break this level and test the next support at $100.21, the 76.4 percent level.
Further bearish indication has been given by a triangle, which has been forming ever since early March 2012. Its lower trendline has been briefly pierced and a valid break could be confirmed very soon when oil drops below its March low of $105.41.
A moderate pullback towards the trendline about $106 may occur when oil arrives at $103.48, but this pullback will be quickly reversed by the subsequent drop.
** 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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