Tech stocks & energy appear volatile

December 19, 2017 12:44 PM

The Cycle Projection Oscillator (CPO) is a technical tool that employs proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their productive behavior. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.

Amazon (AMZN) began a rebound in September that accelerated in late October. The CPO expects the rally to carry into December before beginning a long downward cycle. The weakness is expected to be relatively moderate at year-end and through the first quarter of 2018, but then accelerate in the second quarter of 2018. Traders who miss shorting AMZN in December should look for rebounds in early 2018 as a shorting opportunity.

Apple (AAPL) has been in a steady uptrend since mid-2016, which has seen its value nearly double since May 13, 2016. Currently the CPO shows Apple nearing overbought territory and ready for a mini-correction. While Apple is surely due a correction, the CPO expects only a minor retracement in late November/early December before once again turning higher. Despite being overbought, a safer play would be to wait for a correction as the CPO expects Apple to begin another move higher in December that should bring it to new all-time highs in the first quarter of 2018. At that point, a more substantial correction is expected.

Google (GOOG) has had an impressive rally in the second half of 2018 after a minor correction in the summer. The CPO expects Google to remain range bound for the remainder of 2018 before rallying sharply in January. The spike forecast by the CPO in January and February may be significant, but also will set up a serious shorting opportunity by the end of first quarter 2018. The sell-off is expected to extend through Q2 and challenge major support at the July 2017 low just below $900.

Natural gas has been in a pretty tight 50¢-range for most of 2017 after rebounding from lows set in February. That is about to change according to the CPO, which expects an explosive rally to close out 2017, as we enter the heating season in earnest. In what could be described as a volcano pattern, the CPO shows natural gas rallying through January before reversing course and selling off just as sharply beginning in February. The rally should challenge the later 2016 highs near $4 and the sell-off—expected to last into June—could challenge 2016 lows below $2.

Crude oil broke out of its downward pattern this summer and recently took out its 2017 high above $55. This has pushed crude into overbought territory on the CPO. With crude solidly overbought, it could be a good shorting opportunity, though the CPO’s overall outlook doesn’t have crude turning lower until around Christmas or New Years. At current levels, it may make sense not to wait but if crude breaches $60 that would be a good area to short. The CPO expects crude to continue to drop well into the second quarter and test mid-2016 lows near $40.   

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at @cpopro1. You can reach John at