MCX Crude has witnessed a strong breakout above its trendline. The pattern identification is important to capture bigger swings. We have taken an extract from “The Financial Waves Monthly Update” which is showing a detail study on MCX Crude.
MCX Crude weekly chart:
In previous update MCX Crude published on September, 2017 we mentioned that, “Move above 3780 will result into minor move towards 4000 levels” BANG ON! Crude has moved as expected and made a high of 4100 levels.
The weekly chart is showing inverse Head & Shoulder pattern which indicates potential reversal on upside. The profit target of this pattern is the difference between neckline and the low of head which gives the target of …. levels, whereas conservative target is the difference between shoulder low and neckline which comes near ….. It is best to stay with the conservative target for now and we will evaluate it further once the first target is achieved.
Crude has completed an Extracting Triangle pattern completing wave (e) on downside. We can observe that the downward moving waves are becoming smaller from left to right i.e. wave (e) <wave (c) < wave (a) which indicates that the momentum was reducing on downside and the upside swings were getting bigger. Break above the (b) – (d) trendline in faster time confirms that an important low is in place for Crude near ….. levels which might remain protected for months to come.
In nutshell, Crude trend is positive. Prices can move towards the target of ….. levels. Further break above …….can take the prices towards …. a level which is the head target! So it is time to live with higher Crude prices but that does not mean equity markets will falter because of Crude as both these assets actually had more of positive correlation rather than negative. Interesting times ahead, stay tuned!
The above research shows the importance of Inverse Head & Shoulder pattern combined with Extracting Triangle pattern which brings out more accuracy in predicting the trade setups and to make good profits.
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