May 7th, 2014
by Poly, Zentrader
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Crude is a wonderful asset to trade when it follows the typical Cycles script. For the most part, it does this really well, moving deliberately from one Cycle pivot to the next (From Low, to High, back to Low). But what makes crude difficult to predict and follow is the extreme whipping action it's capable of producing, typically within these short and aggressive (1-3 session) bouts.
I called a top to this Daily Cycle last week when it broke down violently through the 10dma. Since that breakdown, we've seen a pronounced shift within the character of this Cycle, quickly shifting from overbought and speculative to one where traders are now scrambling to contain the losses. These tops take time to develop, but once they occur, the shift is often sudden and vicious.
I made it clear that my expectation was for the $100 level to fall quickly, followed by a decline that will break below the prior DCL at the $97 mark. With crude on just Day 30 of its Cycle, I just don't see how it avoids a DCL failure here as I expect there remains 7 to 12 sessions before the next Cycle Low. For the intra-day traders though, some caution is warranted because crude is short-term oversold and due for a technical bounce.