U.S. oil prices fell for a third consecutive day and made a new 17-month low at $88.18 a barrel early in NY. The global demand slowdown has supported almost an annual 10% decline in West Texas Intermediate crude (WTI), also known as US oil.
Last week, I highlighted that demand remained at the slowest levels since 2011 and that price action may see sellers fade the double-bottom rally. Sellers have taken price below the $90 level for now and now we may see a choppy downward move towards $86.00. Currently, a potential bullish Butterfly pattern may have formed earlier this morning. If price does respect this reversal pattern price could rally towards $89.77, which is the current 23.6% Fibonacci retracement level of the C to D leg.
If price is able to close above the $91.72 level, bullish momentum may persist and eventually target $94.75. Critical support remains the $86.00 zone with $84.61 being the line in the sand for another major selloff.
The trade: Sell US Oil at 89.77 with a stop loss at 90.77 and a take profit at 87.77 The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading