Crude Oil futures are currently testing the completion target aka PRZ (Potential Reversal Zone) of a harmonic pattern, called an Alternate Bullish Bat. This is an intraday perspective, using an STRenko 12 bar chart, shows price at the 88.5 PRZ target, this has been a downside target since rejection of 90.74 test.
The harmonic scenario is currently playing out in a two-fold manner. On the one hand, this is a completion target for a bullish harmonic pattern, so implies a potential bounce into resistance with the initial target at 88.76. This test would be very important because it correlates with a significant level for a larger harmonic pattern, colored in brown, and the longer price can hold below this level the higher the probability of downside continuation to complete this pattern. The second portion is that price has closed below that 88.76 Significant level for the larger harmonic pattern meaning it’s an important resistance level.
If the Alternate Bullish Bat goes into retracement mode, the ideal minimum target is 89.25 and the ideal target is 90.66. A hold below 88.18 has a double bullish PRZ at 87.59 to 87.20. A double PRZ means that two separate harmonic patterns have a common target for its completion and offers a downside target like a magnet and makes a statement if price can find buyers there and if so how much retracement occurs, and finally if price holds below 87.20 the extended target of 85.95 has a higher probability of being tested.
So, in a nutshell, harmonic patterns are offering the bulls an opportunity to step up to the plate at 88.38, 87.59, 87.20 and 85.95. If they can hit a home run with strong retracements, then the ideal scenario will take price back above 91.79.
BY Kathy Garber