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CFD: Ideas You Can Trade - USOil Fails on Triple-Bottom Support

Posted by Steven Hatzakis on Oct 2, 2014 6:58:00 AM

USOil: Fresh Year-To-Date Low Hit After Support Breakdown Near 90.40 

The daily candle chart below shows the price history of USOil over the medium term. This Contract for Difference (CFD) aims to track the spot price of US Crude Oil. USOil is currently trading near 88.87 -around time of publication today- after moving sharply lower in today's trading session where it made a fresh year-to-date (YTD) low on 88.15.

Last time this instrument was reviewed in the Ideas You Can Trade series at the end of last month the outlook remained bearish and support was found on the prior YTD low that had been reached near 90.37.The triple bottom support that was tested around 90.40 failed today with the sharp move lower that followed.

If this downside breakout is genuine then it may be viewed as a very bearish signal and likely to prompt further bearish price action. Whereas, if the level where the triple bottom was established just above 90.00 can be regained, then today's move will be viewed as a false breakout and a sharp recovery could return prices higher.

However, considering how the event has unfolded - the circumstances still seem bullish, although a small recovery could always precede another large drop - as it did before. From a longer term perspective the 2013 low near 85.60 could be the next support target over the medium term if the bearish trend holds, and as can be seen in the additional chart below depicting weekly candles.

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

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 90.67 with a Limit to take profit @ 91.60 and a stop-loss @ 90.11 Risk/Reward Summary: Limit risk = +93 points profit /(-56) Stop-loss risk = Gain to Loss ratio = 1.66

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 88.14 with a Limit to take profit @ 87.50 and a stop-loss @ 88.70 Risk/Reward Summary:  Limit risk = +64 points profit /(-56) Stop-loss risk = Gain to Loss Ratio = 1.14

Daily Candle Chart:

USOilDaily October 2 2014 note

Weekly Candle Chart:

USOilWeekly October 2 2014 note long term

Topics: commodity, CFD trading, Crude, US Oil, technical analysis, cfd, USOIL

 

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