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The somewhat rare occurrence of a triangle stock chart pattern can be viewed in a similar manner. In this case, the bottleneck results from a tightening battle between buyers and sellers, one that gets so tight that it is almost literally coiled to break loose. Thus, a triangle forms on the price charts, leading to a technical condition where something almost has to give. As I began this commentary yesterday, an un-resolved short-term triangle pattern had formed in the continuous crude oil contract. I started to write that under this scenario, an upside break out would occur at $63.50 and would likely lead to testing of the bearish resistance line at $66.50, possibly even the chart high near $70 seen in January. A downside break, on the other hand, held the potential to really surprise, implying a potential target as low as $47 per barrel. By briefly reaching above $63.50 this morning, however, that triangle has been resolved to the upside, as can be seen in the Point & Figure chart below:
A number of technical challenges remain overhead for oil, so I don’t suspect it will be making a new high on this move. At the same time, quiet though this morning’s breakout was, the chart shouldn’t be ignored, and it suggests that oil may once again make a move toward its highs in the near future.
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INFORMATION Over his 20-year investment career, Mr. Zaro has become a highly-regarded technical analyst who runs private client portfolios at Delta Global. He recently served as the Managing Director of Granite Wealth Management outside of Boston and spent nearly 15 years prior as a Vice President at Gage Wiley & Co. His current firm is full-service, but specializes in providing international market access as well as alternative investment strategies. In addition to U.S. market coverage, Mr. Zaro applies his expertise in technical analysis to stocks and stock markets around the globe. The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
