Crude Oil Shorting Opportunity – 10/13/23

The 09/17/23 blog “Crude Oil Elliott Wave Pattern – 09/15/23” noted a potential broad topping zone for Crude Oil between 91.50 to 94.80.

The 09/27/23 blog “Crude Oil Topping Zone” noted  Crude Oil could reach a rising trendline in the 92 area on 09/28/23 or 09/29/23.

The 09/28/23 blog “Probable Crude Oil Top – 09/28/23” noted that Crude Oil hit the trendline and peaked at 92.48.    

Six trading days later Crude Oil crashed more than 13%!   This was the fastest and deepest Crude Oil drop since its bull phase began on 05/04/23.   Something different is happening and its probably the start of a multi- month decline.   Crude Oil seasonal patterns are bearish from September to late December.

The 2 – hour Continuous Crude Oil Futures (CL2!) chart courtesy of Trading View updates the action.

Since the bottom was made on 10/06/23 – CL2! –  risen in an Elliott wave Single Zigzag.  The high on 10/13/23 was marginally above the Fibonacci .50 retracement of the 09/28/23 to 10/06/23 decline. 

Additionally, the length of the presumed Minor wave “A” is 5.36.  The length of the presumed Minor wave “C” is so far 5.20.  The most common Fibonacci relationship between waves “A” and “C” of Single Zigzags is equality.   

The 2 – hour RSI has reached the overbought zone above 70%.

There’s a tremendous amount of evidence from mid-September to 10/13/23 that indicates the rally from 10/06/23 is probably just a bounce in a larger developing decline.

This opens the door for a Crude Oil shorting opportunity.

There’s a small universe of Exchange Traded Funds (ETF) that can take advantage of a Crude Oil decline.  A good ETF is the Ultrashort Bloomberg Crude Oil fund – symbol (SCO).  This ProShares short – ETF seeks a return that is -2x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Because of the additional risk reduce position size to 50%.

At the open of the main U.S. stock market session  9:30 AM – EDT – 10/16/23 establish a 50% position on SCO.  Use 16.20 as a stop loss on half of the position.  Use  15.80 as a stop loss on the remaining half of the position.