Let's take a look at the daily chart for Crude, the CL contract:

Click on image to enlarge!

Price hit the 1.618 target extension, our second target, derived from last year’s high to low as shown with the trendlines. This is a very significant target and it indicates that the contract is extended or overbought at this point. While we can expect a pullback, keep in mind that the pattern is very firmly to upside and shorts are countertrend. Manage any short side trades tightly, particular anything beyond the intraday timeframes. Longer term shorts, a stop above the current swing high would be appropriate, but keep in mind that the strongest nearby support focuses on the 98 – 99 area. As price approaches this zone, I’ll focus on Fibonacci Timing support to see if time cycles from prior declines reinforce the price support for a hold.

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