Why Crude Oil Topped at $55

Click to view long-term chart of crude oil

Recently, there have been wild predictions of Crude Oil heading for $100 a barrel. I had thought we would see a top around $45 due to the reasons below. However, if you look at this Crude Oil chart, you will see evidence that a top at $55 (Kondratieff?) was also likely.

The low to the high of April '86 - Oct '94 is the same height as the low-high of Jul '03 - Oct '04 (shown with yellow rectangles).

The low-high of Apr '86 - Oct '87 shows repeated high-lows through the chart (smaller blue rectangles). The height of the smaller blue rectangles is 50% that of the larger blue rectangles that illustrate the same high-low swing points of April '90 - Sept '90, March '94 - Feb '03, and Dec '98 - Oct 2000.

The larger blue rectangles are 75% the size of the yellow rectangles.

The smaller blue rectangles are 50% the size of the larger blue rectangles.

This makes the small blue rectangles 38% the height of the yellow rectangles.

For details of the importance of these fractions, please read our article on Fibonacci.

To summarise reasons why I thought Crude was likely to top around $45.00 per barrel:
1: Repeated highs around $40 per barrel over the last 30 years.
2. Trendline support across the lows, moved parallel to the highs gives resistance around $45.
3. Trendline resistance across the highs from the year 2000.
4. A Gann "45" top (half of 90 degrees).
4. Mainstream news reports every time Crude makes a couple of cents over past highs: "The highest Crude price for 20 years!" when it's also the less sensationalistic 'highest since last week'.
5. Moronic financial reporters who either know nothing about trading, or at best, nothing about crude oil, who seek out those who have the most sensational opinions, such as crude doubling to $100 a barrel. The same people who were predicting the Dow at 20,000, average house prices of $1 million, etc. "if the trend continues".

Disclaimer: This is not trading advice. Please view our Disclaimer and Terms