US Oil : Contemporaneous bullish behavior continues in current session
The daily candle chart below shows US Oil finding support in the current session on top of the resistance line of a long term bullish channel (point 2 on chart) and trading near 107.50 as of publication (just off session highs –near 107.84). Earlier this week on Wednesday there was a confluence of contemporaneous bullish events including a breakout to the upside of a short term bearish channel (point 4) and breakout above the resistance line of a long term bullish channel (point 2) and then a revesal on the upper resistance line of a newly developed steep bullish channel (point 1) and close near the lower support line of that channel yesterday. Today the opening was below the support line of the steep bullish channel (point 1) but support appears to be found on top of the bullish channel (point 2) coinciding just below it.
US Oil is still looking very bullish over the short and medium term and if the steep bullish channel can hold, a target near previous highs earlier this week near 112.20 may follow along with a target of the upper resistance line of short term bullish channel (point 2) further above near 114.63. The resistance line of the new short term bullish channel (point 1 –which was previously support) was drawn in a previous article and discussed as a likely continuation in early August 2013.
A breakout below the top of the long term bullish channel (point 2) could enable a re-entry of that channel and follow with a target of bearish support just below on the resistance line of the short term bearish channel (point 4) and additional support on the lower line of the short term bullish channel (point 3). Further support could be found lower on the support line of the long term bullish channel (point 2) and long and medium term resistance lines (point 7 & point 5) - if all of the above mentioned lines failed in the case of a sustained bearish continuation.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 107.90 with a Limit to take profit @ 109.99 and a stop-loss @ 106.91 Risk/Reward Summary: Limit risk = +209 points profit / (-99) Stop-loss risk = Gain to Loss ratio = 2.11
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @106.88 with a Limit to take profit @ 103.50 and a stop-loss @ 107.86 Risk/Reward Summary: Limit risk = +338 point profit / (-98) Stop-loss risk = Gain to Loss Ratio = 3.44
Medium term chart: