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Jeff Cooper: Oil Rebounded Hard. Is It Signaling Something Bigger?


Jeff Cooper takes a look at crude oil's recent comeback.

I've issued several notes on oil in the last month flagging the possible W Bottom.

On April 7, I poined out that oil was pointing towards a possible Rule of 4 Breakout, and on April 8, I showed that oil could be in the +1-2 Buy Position.

It was important that the March undercut of the late January low saw no downside follow through and instead knifed higher immediately with oil moving up $10 off the low quickly.

Just as important was the fact that 43 aligns with late January on the Square of 9 Chart.

So at the March test of the late January low, time was pointing to price and price was pointing to time.

Time had squared out with the primary low in late January.

It is no coincidence that January was 180 degrees in time from July 2014 when oil's waterfall decline began.

These natural 90, 180, 270 and 360 degree/day cycles often define interim turning points.

The normal expectation is that the item (in this case oil) puts 2 periods of time on the side, 2 weeks or 2 months. Oil put 2 months 'on the side' as W.D. Gann liked to say before turning up with authority.

Many energy stocks began to creep higher last week and yesterday/today they really exploded.

We were fortunate enough to participate in some of the names that shot higher yesterday. These include Hess Corporation (HES), Oasis Petrolium (OAS), Greenbrier Companies (GBX) and Helmerich & Payne (HP).

Please see HES daily here for 2015:

Notable is the little handle formation late last week when we initiated a position.

We entered OAS last week on a similar low level Cup & Handle.

Members took a long swing position in GBX yesterday at 62.85 and sold half the position today at 64.85.

Now we will let the stock work for us.

We entered GBX on the anticipation that it was poised to pop out of a little bull flag.

HP was a long day trade idea with an entry at 67.40

HP is a good example of an opening spike low that tested the prior day's last pivot followed by a turn to the top side. Note the explosive action and trend day following an Opening Range Breakout (ORB).

Our old friend Continental Resources (CLR) continues to rip higher after we left the party at 48.50 assuming that the 50 resistance would prove to be resistance that could usher in a pullback to the 20 day. It did not.

Conclusion. The SPX 2100 level has been staunch resistance. Just as it seemed Wednesday's strength would perpetuate push to new highs -- be it a marginal new false high or a bold new upleg -- sure enough, the futes are down meaningfully this morning.

Just as it seemed the bears had relinquished the tug of war trading range to the bulls, we may be in store for a trip lower.

As you know, we are still in the Gann Panic Window, but if we were headed lower the presumption would be that an authoritative decline would have been underway from earlier this week.

That said, a lot can happen in a few days in an environment that is ripe with illiquidity. So never say never. Until we get past next week, caution is warranted.

Maybe the oil stocks have been sensing an event of some kind.

Maybe the complacency around Greece is undeserved.

Can the bulls withstand selling pressure this morning? It will be important to see if the indices can hold after the first hour or make a possible opening spike low. If the SPX trades below the low of the first hour we're probably in for a trend day down.

Strategy. The 50 day line isn't much lower -- at 2083 cash. I would use that as a gauge. Breaking below that going into the important Friday weekly close is not a good sign given the SPX has carved out another possible lower high.

If for some reason downside acceleration shows up, a break of the triple bottoms at 2050, get cautious quickly.

Form Reading

Editor's Note: Jeff Cooper has been right on 65% of his swing trades year-to-date. Click here to get a free 2-week trial to his Daily Market Report.
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No positions in stocks mentioned.

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