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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

WWM OIL JUNE 3 2014

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. 

Triple-Top

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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