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Ideas You Can Trade: US Oil - Breakout To Downside Of Bullish Channel

Posted by Steven Hatzakis on Sep 26, 2013 6:00:00 PM

US Oil : Breakout To The Downside Of Bullish Channel Earlier This Week Builds

The long term weekly candle chart below shows the price of US Oil (since early 2007 until today) where it is trading at 103.57 (as of publication). The viscous commodity was covered last week in a previous artilce where the convergence of trend lines indicated that a swift move would follow with either a break-out or a bounce. Since then, as can be seen in the medium term chart -what occurred was a breakout to the downside of the short term bullish channel (point 3 on chart in blue) and short term bearish channel (point 4 in magenta). The continuation was along a very short term bearish line (point 8 in red) and which was predicted as likely in the event of a breakout to the downside.

Prices are below these short and long term support lines, which unless regained, US Oil may test the support line of a long term bullish channel (point 2 in green) and with further support below on a long term bearish resistance line (point 7 in dark red).

An updated chart has been added below as a comparison to last week and against the long term view. If both support lines (point 3 & point 4) are regained, the upper resistance line of the bullish channel (point 2) may become a target vis-à-vis a steep short term bullish trend-line (such as point 1) which could develop.

The medium term momentum appears Bullish while the very short term bearish momentum may be a pullback. From a longer term view, as per the second chart below, the breakout to the upside of the triangle formation - which was anticipated in late June - has since been very bullish for commodity.  

 Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 104.01 with a Limit to take profit @ 104.76 and a stop-loss @ 103.71 Risk/Reward Summary: Limit risk = +75 points profit / (-30) Stop-loss risk = Gain to Loss ratio = 2.5

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 102.98 with a Limit to take profit @ 102.35 and a stop-loss @ 103.29 Risk/Reward Summary:   Limit risk = +63 points profit / (-31) Stop-loss risk = Gain to Loss Ratio =  2.03

Medium term chart:

usoilweekly september 25 2013 note

long term weekly candle chart:

usoilweekly fib sept 25 2013

 

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