The U.S. oil prices fell after the International Energy Agency reported that excess oil supplies and falling demand are expected for the remainder of the year. The US Oil (daily chart) bearish move found tentative support late last week around the $96.55 a barrel level. Price rebounded as high as $98.58 but that IEA report helped trigger the resumption of the overall bearish trend. Expectations are likely to grow for weaker prices as long as we do not see any major supply disruptions. Critical resistance will come from the $100 handle initially and the $108 -$110 zone.
The current directional pause will ultimately look to see if the long-term support level will be respected. The chart above is displaying that a potential bullish butterfly pattern could provide added confluence to that key support level. If valid, the downward move might only be able to decline to the 95.30 level.
The trade: Buy US Oil at 95.50 with a stop loss at 94.00 and a take profit at 98.50 The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading