New York Mercantile Exchange (Nymex) WTI crude oil futures traded down to $86.20, and crossed below its 20-day low; however, crude oil reversed intra-day ending the session a 'big' 3.1% higher. Despite this 'big' one day gain, crude oil has lost 0.9% in the last five trading days, and it appears that history is pointing to further declines. Let us turn to the Market Information Machine (MIM) for more details.
Q: How have crude futures performed in the past when it experiences an intra-day low that crosses below the three-week low before experiencing a big rally on the day?
A: According to the eight previous occurrences of this event, omitting repeat occurrences within 10 trading days, Nymex WTI has shown a somewhat bearish edge that peaks 11 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Thursday, Dec. 6, 2007) is Friday, Dec. 21, 2007.
WTI declines in 88% of the cases (7 of 8) by an average of -4.2% relative to the close on the event date. The average of the one rally is 2.7%. The overall return of the 8 cases is -3.4%, which, based on the close on the event date ($90.23), provides a target price of $87.16.
If you would like to see more details of this historical edge, go to www.markethistory.com
Ryan Soudan is an analyst with MarketHistory.com.
