US Oil : Technical Perspective
BY Steven Hatzakis
The chart shows US Oil looking for support on a short term bullish support line (point 1) after recently failing to break through long term bearish resistance (point 4) which appears to have been a catalyst for the reversal from bullish to now a bearish momentum.
If US Oil fails to find support along this short term bullish line (point 1) then it may test 92.45 which is a long term horizontal support level and if that doesn’t hold then it may look to test the continuation line of a bearish resistance trend line (point 2) which could coincide with support around 89.50 (along that line) if the current momentum continues.
However, if current support lines hold, and provide enough support to reverse the momentum or at least provide a bounce back higher - then a test of medium and long term resistance lines may repeat.
Additionally, US Oil has been in a narrowing formation with prices consolidated towards the median line of the formation with long term bearish resistance lines converging with long term bullish support lines. Accordingly, a sideways market could continue along with short term bullish and bearish trend lines (point 1 and 2) repeating, until a larger breakout of the triangle occurs.Below are examples of how to trade a bearish continuation if the trend continues or a bullish reversal if the trend reverses and bullish/bearish support lines maintained.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @94.70 with a Limit to take profit @ 96.20 and a stop-loss to cut losses @ 93.63 Risk/Reward Summary: Limit risk = +150 points profit / (-107) points Stop-loss risk = Gain to Loss ratio = 1.40
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 93.30, with a Limit to take profit @ 90.23 and a stop-loss to cut losses @ 94.77 Risk/Reward Summary: Limit risk = +307 point profit / (-147) Stop-loss risk = Gain to Loss Ratio = 2.09