Saturday, June 18, 2011

BAL (Cotton ETF) **REQUEST** 6/18

To the left is the daily chart of BAL, a cotton ETF. Right off the bat when I pulled this chart up I saw the same oil charts I have been looking at for a while with just a few differences. After it sold off from its highs (@117.33) we can see that it recently held the lowest retracement almost perfectly (@93.29) before heading lower and just recently breaking a new recent low. If we do an extension from the highs to lows (@78.37) that were just broken off the held retracement level, we can see we are sitting on the 50% extension now. Oil just recently broke this mark in its charts and I would guess that this will be doing the same very soon. I think this would be a great sell in the 78-76 range that we are currently in. Also to note, like in the oil post I just did, we see a long period of the MACD above the 0 line and now breaking it and retesting the 0 line on the lower side, only to reject it.

Crude Oil (CL) Showing similarities to 2008 6/18

To the left is the daily chart of crude, side-by-side is the 2008 sell off with the 2011 sell off were in right now. I think the similarities are pretty important here, as we look at the 2008 sell off, we can see in the MACD a prolonged time of the MACD being above 0, and showing divergence (shown in yellow) as we reach its ultimate high (@147.27). The same can be seen for the most recent run up to our high (@114.83), and while there are a few other times this has happen, none of them have been met with divergence that sold it off quite like these two examples. Now we look at the MACD on the 2008 chart and see how after breaking through the 0 line, we reject the 0 line twice during the subsequent sell off. Scanning the last 10 years of data, I don't see any other periods where we have a prolonged time well over the 0 line followed by rejects of the 0 line to the upside like we saw in 2008. In 2011 we now have seen the first reject of the 0 line after breaking through it and look to head lower. I think oil is in store for another run lower and going back to an older post a target of at least 85 for the next move.