Stocks & Commodities V. 29:7 (10-12, 26-27): How High For Crude by Dean Rogers

Stocks & Commodities V. 29:7 (10-12, 26-27): How High For Crude by Dean Rogers
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How High For Crude by Dean Rogers

Here’s a look at the NYMEX crude oil perpetual front-month contract focusing on the use of wave projections and retracements.

AS of late spring 2011, the varied response to geopolitics has pushed already firm Nymex Wti crude oil prices to more than $100 per barrel. Sensing the speculation, major media and news outlets have caught the “how high will crude oil go” bug, while the pundits have been suggesting barrel prices ranging from the $120s to $200-plus.

Of course, reacting to these forecasts can be treacherous. Pundits often blindly forecast prices without any measure or accountability or responsibility even if they turn out to be wildly wrong. And back in 2008, when prices zoomed to almost $150 per barrel, many people wondered how much higher prices might go.

This is happening again now. Here, I will examine the Nymex crude oil front-month contract from a purely technical standpoint and focus on the use of wave projections and retracements. The technicals are good at pinpointing near-term support and resistance and often accurately predict future price activity. The front-month or “perpetual” contract is a nonnormalized continuation chart of the prompt-month futures. Using the perpetual in forecasting allows us a historically long view of prices and waves.


Wave cycles consist of three distinct high and low swings, denoted by the labels X, Y, and Z. For an up wave, cycle X is the first and lowest point, Y is the swing high, and Z is the pullback low after Y. For a down wave, cycle X is the first and highest swing, Y is the swing low, and Z is the pullback high following Y.

Within a wave cycle, these three prices can project to targets using the golden mean, or phi (Φ = 1.62), and derivatives of Φ. The formula for a target is:

Z + (|X – Y| * factor of Φ) for up targets Z – (|X – Y| * factor of Φ) for down targets

The factors of Φ used in this analysis are 0.62 (1/Φ), 1, 1.38 (1 + (1/Φ)2), 1.62 (Φ), and 2.76 (1.38 x 2). There is one additional target called the trend terminus, which is calculated as Y3/X2.

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