Tags: Kennedy | oil | plunge | 32.40

Elliott Wave’s Kennedy: Oil Will Plunge to $32.40 a Barrel

By Dan Weil   |   Wednesday, 22 Aug 2012 07:58 AM

Crude oil is headed for a major tumble — to the tune of 66 percent, says Jeff Kennedy, chief commodity strategist at Elliott Wave International, which predicts markets based on chart patterns.

The technicals show that oil is now stuck in a range of $75 to $115 a barrel, he tells Yahoo. Crude recently traded at $96.40.

The near-tripling of oil from its December 2008 low of $32.40 merely represents a bear market rally, Kennedy says.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

“We need to be patient, because once we fall below $75 to $80, that’s going to lead to a sizable decline down to $32.40.”

Even if you don’t follow his Elliott Wave charts, a simple head-and-shoulders pattern shows that a break of the neckline at $75 to $80 signals a plummet to $40, Kennedy says.

In the meantime, watch out for a breakdown in the shares of ExxonMobil (XOM), he says. The stock is hitting resistance at $90 to $95, Kennedy maintains.

“The same thing in late 2007 to early 2008 led to a sizable selloff. That resistance area has been in play for over five years.”

But not everyone is bearish on Exxon.

“ExxonMobil sets itself apart among the other super majors as a superior capital allocator and operator,” Morningstar analyst Allen Good writes in a report for clients.

He sees fair value for the company’s stock at $91 and recommends buying if it drops to $72.80.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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