Two strikingly similar H&S tops on a couple of petroleum stocks.
Diamond Offshore Drilling (DO) touched its ever high of 149.30 on the last day of 2007 and has been in a down trend ever since. 3 interesting patterns that have developed in that period;
Starting off with the weekly picture; DO is forming a descending triangle shown in green. According to statistics most descending triangles break to the down side.
Second warning sign is DO medium term trend line (in red) since 2011 broke down today.
On the daily chart DO has completed a 10-months H&S Top with blue neckline.
These are the warning signs and I will leave you to reach your own conclusion on where DO is drilling next 🙂
Awaiting your likes & comments and sharing
There is high correlation between oil prices and oil service companies as shown in the chart below. So I would expect an increase in oil prices will push Oil Services ETF (OIH) upwards.
Below OIH has formed a 4 year almost symmetrical Head & Shoulders, but what is interesting is that the pattern failed as of last week by closing above the right shoulder major resistance level of 45.80. This resistance zone is significant because it has kept prices down for over 20 months. I am projecting a possible target of 55.
After the breakout (which i bought & got stopped out at a small loss) oil formed a 4-day island reversal and pushed down back into the pattern. This is bearish news for the bulls. Further weakness will be indicated by a close below the right Inverse H&S signaling a Inv H&S failure. My recommendation is to stay away from Oil until it breaks 30.79 on USO ETF shown below.
Below is the daily chart of Oil traded with USO. Shows (1) 4months H&S bottom inside (2) a triangle.
(3) this triangle is inside another larger one as shown on the weekly chart below. The upcoming trend up or down i really dont care will have a lot of momentum