Beware the down side of black gold

had already peaked at US$55.24 and fell heavily afterwards.

In March and May 2017, a rise in oil was described as a “big rally”, but the chart indicated otherwise as a rally hadn’t been confirmed. These rises were actually ‘sucker’s’ rallies, which lasted for a few weeks before oil continued a decline to US$42.

So what have we learned? Simply, it’s more important to understand the price history and where it’s headed. And this principle doesn’t just apply to oil, it works for any stock or market.

Remember, this is about the transfer of wealth from those without knowledge to those with the knowledge. So ask yourself, which group am I in and where would I like to be?

While a rise is likely for oil, the chart indicates that it will pull back soon before the next rise. So, there’ll be new opportunities to profit in 2018. This week the market traded to a high of around 6256.5 points, well within the beforementioned zone (6200 to 6400 points) where the market is likely to pull back, at least temporarily. You may have heard me say that January can be volatile and therefore expect the market to take a breather. That said, until the market indicates otherwise, it’s on track to trade to between 6370 and 6450 points in the first quarter.

Important times for our market this half of 2018 are mid-February/early March or late April/early May. Turns often occur in the latter period when the market has been buoyant into the new year.

Remember, the Australian market is yet to break through the all-time high at 6873.2 points in November 2007. It is important to continue to manage risk while waiting for a further rise. Dale Gillham is chief analyst at Wealth Within.