Crude oil dropped more than 10% since mid-April. Does this alter our 2017 oil forecast?

As mentioned in our 2017 oil forecast (published February 8 here), investor sentiment and seasonality did not line up for a sustainable move (in either direction). We therefore expected a relative trading range.

Ideally this trading range would conclude with a push to about 60.

However, the April 9 Profit Radar Report stated that: “Trade is nearing overbought, and the resistance cluster at 52-55 is up next. Within the bullish stretch of seasonality, there is a short-term cyclical high next week. Smart money hedgers have significantly reduced their short positions. In summary, oil may show some weakness in the coming week(s).”

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The entire rally since the February 2016 still appears to be a complex wave 4 correction. Wave 4 corrections are notorious for prolonged, unpredictable trading ranges (with an up side bias).

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One of the unique features of waves 4 is that the rally can conclude without a new price extreme (the April high did not eclipse the prior January/February high). It is therefore possible that oil is already on its way to new lows.

Seasonality allows for more weakness in coming weeks, but remains strong until September. Short-term, trade is nearing the ascending green support trendline as oil is getting oversold. There should be a bounce.

The Profit Radar Report continuously monitors a wide selection of indicators to identify low-risk and high probability setups.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron's rated iSPYETF as a "trader with a good track record" (click here for Barron's profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

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