Brent crude (QA) is in a major (long-term) sideways trend. I’ve changed my view on Brent (and most of the rest of the Energies sector) based on markets having difficulty maintaining upside momentum. For now, I’ll call the range between the September 2023 high of $97.67 and May 2023 low of $68.20, a range of roughly $30. We also see this consolidation between lower highs and lower lows indicating the market will break out at some point. 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. Sell stops would be below the 4-month low of $76.62. Otherwise, traders might have moved to the sidelines, waiting for a breakout.
WTI crude oil (CL) is also in a major sideways trend, also consolidating between converging trendlines. The long-term range is between the May 2023 low of $63.57 and September 2023 high of $95.03 putting the midpoint at $79.30, near the May settlement of $79.26. 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 February 2024 low of $71.41. Otherwise, traders might have moved to the sidelines, waiting for a breakout.
Distillates (HO, heating oil, diesel fuel, jet fuel, etc.) got more complicated during May, from a technical point of view. The spot-month contract took out its previous low of $2.4838 (December 2023) on its way to $2.3508 before closing the month at $2.3636. 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. Traders were likely stopped out below the December 2023 low of $2.4838 for a loss of 43.6 cents.
RBOB gasoline (RB) remains in a major 5-wave uptrend with the May selloff looking to be a Wave 2 move. If so, the spot-month contract could pull back to near $2.15 over the coming months, after closing May at $2.4260. 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 low of $1.9672 (December 2023). Additional longs could be added when the Wave 2 move looks to be bottoming.
Natural gas (NG) looks to be in a sideways trend at the low end of its recent major downtrend. Theoretical Positions: Realistically, there are no positions at this time. Traders might’ve gone long on the bullish breakout above $2.168 during May, the high from February 2024.
