Oil

In recent reports, we made the case that a rally by oil through 59-60 would be a potentially important event. On Wednesday, oil finally violated that important resistance area. Moreover, in point and figure terms, this rally can be described as a breakout through both a double top and a long-standing downtrend line. Moreover, we can make the case (admittedly with a bit of artistic license) that the rally prior to Wednesday’s breakout was impulsive.

How high is high? We have made the case that last year’s decline was the first leg of a larger pattern (i.e., an “A” wave in Elliott Wave parlance). Logic would suggest that a subsequent rally should be a Fibonacci retracement of that “A” wave. For example, in our March monthly Insights, we pointed out that a usually minimum 38.2% retracement of last year’s decline would result in more than a double (to 75) from December’s low. With that in mind, out primary P&F chart shows a potential objective of 73-74. Fibonacci relationships suggest a move to at least 64-65, with 69-71 and 77-79 viewed as realistic alternatives. Key support below the 60-59 breakout point is 57-56.