Updated: Apr 19, 2020
We had a crazy volatile session last week where we saw global indices rallying stronger despite negative fundamental data and the inevitable possibility of a recession in the coming months. In this article, we will cover the following points:
ES Technical Analysis;
Gold Technical Analysis;
Crude Oil Technical Analysis
1. The E-Mini S&P 500 gaped and rallied without any meaningful pullback according to what we expected on our last week's trading plan (see video below).
Current pattern still suggest further upside towards 2892-2930 resistance zone but with one condition: hold pullbacks above 2700 support!
ES 60 Minute Chart - Apr 13, 2020
As you see from the above chart, this is a classic Elliott Wave pattern that plays out beautifully with Fib retracements and extensions. For the Elliott fans out there, this recovery bounce in ES may easily be an (a)-(b)-(c) or i-ii-iii(in the making) formation targeting initially the Fib cluster area (2892-2930):
The 2892 resistance is the 100% extension from March 24th low - March 26th high - April 2nd low;
The 2930 resistance is the 61.8% retracement from the "orthodox" top of February 17th to the low of March 24th.
I have seen such pattern unfold thousands of times in the past and that is why our first hypothesis for this coming week is to try and position short around the Fib cluster area (ideally in the higher end). We are intraday traders and sometimes we swing our position for a few days depending on risk, therefore the target would be any strong pullbacks we get from the Fib zone.
It is important to note that any strong break & hold (with momentum & volume) above the Fib. retracement of 61.8% = 2930, would constitute an extended recovery towards the next Fib. levels: 3072-3100, as such, be careful to have stop losses in case your primary hypothesis gets invalidated.
2. Moving on to Gold, this was another beautiful play that went according to our last week's preparation. Even though Gold didn't give us the ideal entry price to position long (1600), we still entered on a pullback and caught 20 points of the rally. To review our last week's trading plan in Gold, take a look at the following video analysis:
Last week we needed Gold at 1688 and we are here presently. What's next? Our medium-term target in Gold seems to be 1780-1800 but that requires a few conditions to be met in the next 2 weeks:
Hold pullbacks above 1600 and,
Break and hold above 1720 resistance.
Let's take a look at a short-term price chart to observe a few support and resistance levels.
XAUUSD 60 Minute Chart - April 12th.
We are currently retesting resistance from February-March for the 3rd time, and usually we get a breakout on tests more than two. We are cautiously bullish in Gold which means we will trade pullbacks on 15 minute timeframe in order to tighten the stop loss area. A strong break and hold above 1700 level this week might signal another massive rally towards 1800 mark.
What if Gold fails to rally above 1700? How will we react and can we short? The answer for us is: No! We will not short Gold unless we see a break below 1670! If buyers won't be taking over and controlling area above 1700, we might spend this week into a pullback towards 1640 support. As such, keep in mind these scenarios:
All pullbacks above 1670 remain a good buy opportunity with target 1700-1720-1780;
A breach below 1670 will give us green light to short for deeper pullback towards 1640 with stop above 1675.
3. Lastly, we will touch a bit on US Crude Oil and take a look at possible trading setups coming up for this week. Before we jump into the technical analysis of oil, you should keep in mind a few important fundamental factors that can weigh in on the price:
Global oil demand has decreased by at least 20% due to the CoronaVirus pandemic - Read more on this article from BBC,
A price war erupted between Saudi Arabia and Russia which put more downward pressure to the price;
A global deal to cut oil supply is currently undergoing and by tomorrow, April 13th, we will have more information whether an agreement to cut supply by more than 10mln barrels / day is possible or not - Read this article from Bloomberg.
Now that we covered the fundamental aspect, let's take a look at the price chart. First, we need to understand the big picture; thus, the following is an EW labelled chart of Oil:
US Light Crude Oil - Log Scale Weekly Chart
According to Elliott Wave Principle, Crude Oil is trading in the last legs of the Cycle degree trend which projects a bottom zone of $18-$13/barrel. This means, there is still possibility of another final wave of decline until we hit a Cycle low. Wave W = 76.5% decline; Wave Y = 76.8% decline; Wave Z (as of today) = 74% decline. If we are to consider the guideline of equality between corrective waves then we support our previous bearish comment on a bottoming zone of 18-13. Nevertheless, we need to remain flexible and observe how the short-term patterns will unfold.
What will happen to the price if OPEC & OPEC+ reaches an agreement to cut supply with over 20 million barrels/day? Do we have room for a bounce on this long-term chart and still not call that bounce as a confirmation of a low? Let's take a look at a short-term price chart.
Crude Oil - Daily Chart
The above chart, tells us that yes, we can accept a bounce up to $33 mark/resistance but thereafter, we need to drop one more time towards the lows. Although, it would be better if we continue to drop from current price and reach at least 18 target. If we were to scale down even lower then we can see the that pattern remains quite weak and bound to gap extremely depending on the supply deal.
Crude Oil - 60 Minute Chart
As long as we trade below 25.50 resistance then we would be inclined to short for new lows towards at least 18.00 support. A strong break above 25.50 and a hold for a few hours above this level would be the sign to signal a rally towards 33.00 resistance.
If you want to trade live with us during the week then get in touch.
Until then, safe trading!