Indicators For A Blow-Off Top In Oil

Blow-Off Top: Oil

We are not the biggest fan of technical analysis. Yet on the flip side, all investing information should be taken in and evaluated. We have run across the following pattern from time to time with individual stocks. We have laid out the definition below. We are wondering if the large spike in oil could fit this category.

A "blow-off top" refers to an extremely quick spike in a stock’s price, followed by an extremely quick and severe drop in price. A blow-off top may be found on an intra-day chart, a daily chart, or even a weekly or monthly chart in some cases. A blow-off top may be found on individual stock charts or on the charts of indices.

A blow-off top is generally seen by chartists and technical analysts as an indicator of future market actions, although different technical analysts may view the significance of a blow-off top differently. For many technical analysts, a blow-off top indicates a major resistance level. And while many technical analysts might consider a downtrend likely to follow a blow-off top, a subsequent penetration above the level of the blow-off top would be considered extremely bullish.

Comments

[John Pseudonym:]

All waves eventually crash and the bigger they are, the harder they fall.

It's natural. Something will happen to jolt the market and those that have made a lot of money will take it off the table in order to protect it.

Others will jump in and buy the dip.

More will sell.

Everyone starts selling.

exhaustion.

Bottom is reached.

Whenever a chart goes vertical, bet on the downside.

2008 Jun 10 09:47 AM

[sbenard:]

You really didn't make a case here at all. Basically, your article doesn't suggest that this IS a blow-off top. All you really are doing here is asking a question: IS THIS a blow-off top?

You didn't make your case. This was a waste of time for me to read.

2008 Jun 10 09:55 AM

[Edward Janeck:]

Oil may be at a short-term top, who knows, no one except Matt Simmons thought it would be this high. I will tell you what Matt Simmons says about future oil prices @
theinvestingspeculator...

2008 Jun 10 09:57 AM

[turkish:]

That is BS. Peter Schiff has been saying that this would happen. Read his book (or go to his website Euro Pacific Capital and watch his interviews for the past 5 years). There are lots of smart guys out there. Peter provides huge amounts of info for free.

PS my only connection to Peter Schiff is that I read his book and watched his interviews

2008 Jun 11 01:49 PM

[Paul Killinger:]

Yes, it's possible, if you're a technician.

As I follow fundamentals, however, I have to ask myself, "What would it take for oil prices to drop significantly from here?" This is the question we should all be asking ourselves!

Alright, let's see... what WOULD it take? Well, prices could go so high people would drive alot less, but, as you can imagine, that wouldn't be good for our economy. Or production could increase, but what producers have surplus crude or gasoline available now? Maybe our government will intervene and fix the price or ration gasoline, except history tells us this would lead to shortages and gas lines.

Conversely, you can ask yourself what might drive prices higher?
You can come up with a good case for a variety of scenarios here, as well. To conclude, then, what's inescapable when you do this analysis is that we need MORE oil and gasoline if prices are going to retreat in the foreseeable future. Agreed...?

2008 Jun 11 05:08 PM

[Steven Ward:]

Factors other than a supply demand imbalance are affecting the price of oil. The slide in the dollar for one. The spectre of Israel attacking the Iranian's nuclear capability for two. The Chinese increasing imports for the Olympics to go smoothly as number 3. And of course a supply demand imbalance.
This super spike in oil prices may not have a long or large price downside.

2008 Jun 11 07:13 PM