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Today’s Trading Edge: Black Gold’s Bearish Divergence May Signal Run to Century Mark

Posted by Edward Moya on Jun 3, 2014 6:56:00 AM


Bearish Hidden Divergence

Black gold, a popular nickname for Oil has a daily chart that may be displaying a bearish hidden divergence that may support a decline to the century mark and eventually down towards the 100-week Simple Moving Average (SMA) at 96.77.  This technical setup identifies a lower high with price while the oscillator has a higher high.  If valid, we may see price correct and target the lower boundaries of the consolidating triangle that has been in place since March. 


While price is still trading above both the 50-day and 200-day Simple Moving Averages oil prices have failed to breakout above the 105 area and signal a strong continuation to its bullish trend.  If the triple-top pattern can signal a break below 101.50 and invalidate the bullish Gartley pattern on the four-hour chart, the path lower might have limited difficulty. 

Risk to the Upside

With price tentatively forming an ascending triangle on the daily chart, a sustained rally will need to take out the 105.50 area and invalidate the triple-top pattern displayed on the daily chart.  Further resistance will lie at 107.79 which is the 78.6% Fibonacci retracement of the 2013 high to 2014 low move. 

The trade: Sell Light Sweet Crude at 101.45 with a stop loss at 102.95 and a take profit at 98.45.  The Risk/Reward Ratio is 1: 2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading


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