US Oil : Short term bearish momentum in down channel
The daily candle chart below shows US Oil failing to hold onto the support line of a steep short term bullish channel (point 1 on chart) which was discussed in a previous article in late July where it has since entered into a developing short term bearish channel (point 4) and exhibiting bearish momentum (point 8).
US Oil is currently trading near 105.12 (as of publication) which coincides along the upper short term bearish resistance line (point 8) which has been followed closely over the past six trading sessions.
A breakout above this short term line (point 8) could enable a bullish trend line (such as point 1 to develop) to support a target of the resistance line of the long term bullish channel (point 2) and the resistance line of the developing short term bearish channel (point 4).
If US Oil does not break above the short term bearish resistance line, a bearish continuation could bring prices closer towards the support line of the short term bearish channel (point 4) and/or the short term bullish support line (point 3) with additional support further below near long and medium term bearish resistance (point 7 and point 5).
Below are examples of how to trade a bullish reversal or a bearish continuation:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 105.40 with a Limit to take profit @ 105.95 and a stop-loss @ 104.99 Risk/Reward Summary: Limit risk = +55 points profit / (-41 ) Stop-loss risk = Gain to Loss ratio = 1.34
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @103.59 with a Limit to take profit @ 102.45 and a stop-loss @ 104.44 Risk/Reward Summary: Limit risk = +114 point profit / (-85 ) Stop-loss risk = Gain to Loss Ratio = 1.34
medium term chart: