Brent crude (QA) remains in a major (long-term) uptrend with the seasonal selloff during October looking to be Wave 2 of the 5-wave pattern. Given Wave 2 could retrace as much as 80% of Wave 1, the maximum downside target is near $74.50. The previous 4-month low from July is $74.57. Theoretical Positions: Previous short futures were covered and new longs established as the spot-month contract took out the previous 4-month high of $87.49 during August. This has longs at roughly $87.50. Additional longs could be established when Wave 2 looks to be bottoming.
WTI crude oil (CL) is in a major (long-term) uptrend. Similar to Brent, WTI looks to have moved into a Wave 2 selloff during October with the maximum downside target near $70.30. Theoretical Positions: Long positions were established on the move above the previous 4-month high of $83.53 (April 2023). Additional longs could be established when Wave 2 looks to be bottoming.
Distillates (HO, heating oil, diesel fuel, jet fuel, etc.) remain in a major 5-wave uptrend with the October selloff looking to be the beginning of a Wave 2 move. This puts the maximum downside target at the 80% retracement level near $2.44. Theoretical Positions: Traders could be long just above the previous 4-month high of $2.9198. Additionally, those needing to cover diesel needs could do so near the July close of $2.9855 or wait for the Wave 2 selloff to bottom.
RBOB gasoline (RB) looks to be in a sideways trend, marked by higher monthly highs and lower monthly lows. The range is now between the December 2022 low of $2.0204 and July 2023 high of $2.9960. Theoretical Positions: Longs could’ve been established near the December 2022 close of $2.4783, based on a bullish spike reversal. Sell stops would’ve been triggered below the 4-month low of $2.3925 (September 2023) for a loss of nearly 9.0 cents.
Natural gas (NG) extended its major uptrend to a high of $3.643 during October. The market is vulnerable to a possible Wave 2 selloff, with its seasonal pattern a move lower starting in late November. Theoretical Positions: It’s possible traders established long futures positions near the April close of $2.41. Additional longs might have been established during August with the move to a new 4-month high beyond $2.878. If so, the average long position would be $2.645. Sell stops would be below the previous 4-month low of $2.424 (August 2023).