SINGAPORE: Brent oil may be bound within a range of $66.22-$86.70 per barrel next quarter, due to the completion of a five-wave cycle from $15.98.
The uptrend from $15.98 observed closely a set of retracements on the preceding downtrend from $147.50. Oil failed to break a resistance at $81.74.
The failure was followed by a sharp correction, which appears to be a pullback towards a falling trendline. However, when put in a bigger picture, the pullback could be indeed a wave (a), the first wave of a correction from $86.70.
This is because the uptrend from $15.98 could be well divided into five waves.
The correction against this trend is expected to last longer, consisting of three waves.
The current wave (b) may end around $81.74 or extend a bit further to $86.70. A detailed study on the daily chart would provide a clue of its ending point.
Simply based on the bearish divergence on the weekly MACD, oil is unlikely to revisit the recent high of $86.70, as this is a strong reversal signal, suggesting a further consolidation.
Only a surge above $86.70 could confirm the continuation of the uptrend. On the daily chart, oil is riding on a wave (b), which may have a simple structure, consisting of three waves only.
Under this scenario, this wave (b) could end around $80.26, to be then totally reversed by a downward wave (c).
However, there is another scenario, which is more preferred.
There might be five small waves making up the wave (b).
These waves unfold within a rising wedge, with the wave (d) to travel towards $76.37 and the wave (e) to develop towards $81.75.
Eventually, this wedge will contract to a point and be confirmed as a bearish pattern. As far as timing is concerned, the wedge may complete in February.
A deep fall would then start and last until end of March.
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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