Brent crude (QA) remains in a major (long-term) uptrend with the December low looking to be a Wave 2 trough of the 5-wave pattern. The spot-month contract posted a December low of $72.30, an 86% retracement of Wave 1 from the May 2023 low of $68.20 through the September high of $97.67. A deep retracement is characteristic of Wave 2. Wave 3 is now expected to take out the Wave 1 high of $97.67 (September 2023). 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 2023. This has longs at roughly $87.50. Additional longs could’ve been established near the January close of $80.55 based on the idea Wave 2 has bottomed. This puts the average long position at roughly $84.00.
WTI crude oil (CL) is in a major uptrend. Similar to Brent, WTI looks to have completed a Wave 2 bottom with the December 2023 low of $67.71. Wave 3 is now expected to take out the Wave 1 high of $95.03 (September 2023). Theoretical Positions: Long positions were established on the move above the previous 4-month high of $83.53 (April 2023). Additional longs could’ve been established near the January 2024 close of $75.85 on the idea Wave 2 has bottomed. The average position would be near $79.70. Sell stops would be below the December 2023 low of $67.71.
Distillates (HO, heating oil, diesel fuel, jet fuel, etc.) remain in a major 5-wave uptrend with the December low of $2.4838 looking to be a Wave 2 bottom. Seasonally the market tends to rally through late April, with a Wave 3 rally expected to take out the Wave 1 peak of $3.5092 (September 2023). Theoretical Positions: Traders could be long just above the previous 4-month high of $2.9198. Additionally, those needing to cover diesel needs might’ve done so near the January close of $2.7852 based on the idea Wave 2 has bottomed.
RBOB gasoline (RB) extended its major uptrend to a high of $2.7749 during March. Theoretical Positions: Traders likely established long futures positions above the previous 4-month high of $2.5810. If so, stops would be placed below the previous 4-month low of $1.9672 (December 2023).
Natural gas (NG) extended its major downtrend to a low of $1.481 during March. 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. It’s also possible those long were sold at the end of November with the spot-month contract price at $2.802 for an average profit of roughly $0.158. Realistically, there are no positions at this time, though the brave might’ve sold near the November close of $2.802.
