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Today’s Trading Edge: Oil’s Geopolitical Risk Rally Falters, but is the Upside Risk Over?

Posted by Edward Moya on Jul 18, 2014 9:41:00 AM

WWM OIL JULY 18 2014

Geopolitical risks sparked a rally with oil prices that will end a month long selloff that took price from 107.54 towards key support from the 50-week SMA and the psychological century mark that was tentatively penetrated earlier this week.  As questions are being answered to what happened to the Malaysian Air passenger jet that was downed in the Ukraine, price action on the charts highlight the market pricing in no expectations for European countries to escalate military efforts against Russia.  Second move higher yesterday in oil prices came from the news that Israel continues to escalate its ground defensive in Gaza.  Both stories are nowhere near over and still can still provide a catalyst for oil to jump higher again.   

The light sweet crude oil daily chart displays a key respect of our three key SMAs.  The four-week slide ended earlier this week when price respected the 200-day SMA.  Price then saw oil’s geopolitical sparked 2% rally yesterday capped by the 50-day SMA.  If price ultimately finds support around the 100-day SMA, we may see oil prices resume its upside bias.  Initially, limited upside however will be targeted towards 105.00.  It is around that zone that a bearish Gartley pattern may form. 

If price breaks below the key 100 level, further downside may target the 97.50 area.  107.50 remains major resistance followed by 110.  

The trade: Buy Light Sweet Crude at 102.00 with a stop loss at 99.90 and a take profit at 104.75.  The Risk/Reward Ratio is 2: 3

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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