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CFD: Ideas You Can Trade - USOil Hits Long Term Bearish Support Line

Posted by Steven Hatzakis on Jan 16, 2015 12:08:00 PM

USOil: Bottom of Channel Reached on January 13th Could Mark Reversal of Recent Dive 

The medium term daily candle chart below shows the price history of USOil, a Contract for Difference (CFD) that aims to track the underlying spot price of US Crude Oil. Today this CFD is trading near 47.35 around time of publication.

Late last month when USOil was last reviewed in Ideas You Can Trade, a triangle pattern developed and ended up breaking towards the downside and continuing its steep dive.

This Tuesday's low of 44.17 coincided with the lower support line in a longer  term bearish channel visible on the additional weekly candle chart below. This line has the potential to reverse the recent bearish trend, even if that reversal is short-lived, and already in the last few days since that low a recovery has appeared.

If the lower support line of the bearish channel of the longer term chart fails, then a continuation of the recent dive should unfold, and then next downside support target could be near 33.55 which was close to the February 2009 low (as seen on the weekly candle chart below). If however the small recovery since Tuesday holds - then a genuine recovery should follow to lift USOil higher. 

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

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 48.88 with a Limit to take profit @ 49.99 and a stop-loss @ 48.02 Risk/Reward Summary: Limit risk = +111 points profit /(-86) Stop-loss risk = Gain to Loss ratio = 1.29

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 45.79 with a Limit to take profit @ 44.10  and a stop-loss @ 46.29 Risk/Reward Summary:  Limit risk = +169 points profit /(-50) Stop-loss risk = Gain to Loss Ratio = 3.38

Daily Candle Chart:

USOilDaily january 16 2015 note

Long Term Weekly Candle Chart:

USOilWeekly january 16 2015 note

 

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