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Oil: Despite Decline, A 'Must-Have' Profit Play

This is the eight consecutive month in a row oil has been on a negative side.

Another one of those technical analysis parameters usually forgotten during severe downturns such as when Dow Jones went into meltdown late 2002 producing 8 consecutive negative days before being able to reverse the trend.

Speculative at best but worth the effort when timing becomes the essence during severe chaotic conditions where most technical and fundamental analysis are breaking down.

The Good, The Bad, And the Inaccurate Oil Forecasts

Use Elliott Wave analysis with Oil/

On the monthly chart, oil is clearly now on the 4th wave similar to Nikkei 225 of late 2005. They have so many similarities only that oil went into a superspike greater than Nikkei did on 2005. My maximum target at that time to the upside was $115 for oil without a superspike. GS was able to predict the superspike to $145. Since the spike was unsustainable just like Nikkei 225 of late 2005; the ensuing correction was also drastic and was able to consume less time than the rally.

Most charts of this characteristic superspike of the the 3rd wave results in "super-super spike" correction or some chartists call a dip trip that then results in slow finalyzation of the 5th wave to the upside. Most chartists at that time would not believe such a spike run could be sustainable.

An example is also Hangseng and Senzhen indexes on the monthly charts with the 3rd wave and 5th wave going over-extended run until 2007 similar to Dow Jones of the late 1920's ending in 1929. The resulting correction was horrible when the 3rd and 5th waves of the 1-2-3-4-5 run over-extended. Oil has the iii-rd wave and v-th wave of the 3rd wave going over-extended resulting in a correction similar in fashion with Dow Jones of 1929-1932, Nasdaq of 2000-2003, and Hangseng of today from 2007 - only that they are at different stages and time frames but have similar sub-stages going into over-extented runs to the upside. Use fibonacci run; anything over 262% price projection of the previous price run is over-extended and is therefore unsustainable.

Optimistically, Oil should be able to rally slowly to $177 in 3 to 7 years.

Use Nikkei 225 rally from 2005 to 2007 as a template for the highest probability scenario.

Oil has a bigger time frame template than Nikkei 225.

Bet on the odds. There are lots of possible scenarios but the most common is the highest probable.