Crude Oil, CRB & Gold: Some thoughts

In 2007-2008, crude oil prices went into a parabolic rise. This was followed by a parabolic plunge or fall in 2008-2009. See Chart 1 below.


Chart 1: WTIC's weekly chart from 2007-2011 (Source: gicharts.blogspot.com)

Since July 2014, we have been witnessing a parabolic plunge in crude oil prices. The price fall became steeper as the time passed. As noted previously, I believe that the bottom could be at about USD50, with possible intra-day lows of RM40 (due to overshooting). I have highlighted that the technical indicators are supportive of a bottom at these prices. If this scenario pans out, we might see a more than decent rebound in the price of crude oil.


Chart 2: WTIC's daily & weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

The drop in the prices of crude oil coincides with the drop in CRB index, which is the commodity future price index which consists of 28 commodities. The CRB broke its "pennant" formation at 275 in October last year. A 1-to-1 projection would place the target for CRB at 225. See Chart 3 below.


Chart 3: CRB's weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

Interestingly, Barry Ritholz of the Big Picture had posted a long-term chart for CRB, which was prepared by Bianco Research L.L.C. For more, go here. Using that chart, we can see that CRB broke above its strong horizontal resistance at 135 in 1970. In fact, CRB is in an uptrend line which stretches back to 1933. That uptrend line, SS should provide support to the index in the current drop at ~220.


Chart 4: CRB's monthly chart from 1749-2012 (Source: Bianco Research L.L.C.)

Finally, let's look at gold. That barbaric relic has been dropping for the past 3 years, from a high of just above USD1800 in late 2011 to a recent low of just under USD1200 (in October-November 2014). Due to recent currency turmoil and heightened economic risks in some oil-exporting countries, gold prices have enjoy a rebound. It may have just broken above its intermediate downtrend line. Its strong resistance is at USD1380-1400.


Chart 5: Gold's monthly chart as at Jan 16, 2015 (Source: Bullionvault)


Chart 6: Gold's weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

Based on the above, I believe gold could be a good buy. It is still to early to make a buy call on crude oil. My earlier call on O&G stocks has panned out quite well. Good luck

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, gold, crude oil or O&G stocks.