In our March 11, 2016 crude analysis, we have mentioned the upside potential that crude had by following a bullish channel that target $40-$42 price area (see chart below).
As seen from this recent chart, crude completed wave iv as a running flat corrective wave (a-b-c). The target for wave v is the upper-bound of the channel at $41.20 – $41.50. Considering this structure and a 5-wave up move from wave iv, we might expect a temporarily top in crude today and a turning down next week.
We need to see a breach below $39 and then below the lower-bound of the channel, in order to confirm the top in crude.
We will start a small short position at the upper-bound of the channel and keep stops tight.
If we see a move below $40.50 again, we will start pyramiding until support at $39.00.
Stop Loss = Breach of upper bound
Target 1 = $37
Target 2 = $35