Oil prices have rebounded from a double bottom pattern around the $44.00 support region. This countertrend rally occurs after a month long consolidation after making a near 6-year low. Today’s rally marked the third consecutive bullish trading day and was supported by the OPEC upgraded forecast for crude demand.
Price action on the four-hour chart shows that the recent advance is currently forming a potential double top pattern. If the reversal does drive price down below the bullish trendline in green, we could see momentum take price back down towards the double-bottom region.
Critical resistance will come from the 50-day SMA, which is currently at $53.51. Only consecutive daily closes above this region would open the door for one last thrust towards $56.00, before we may see downward momentum return.
Major downward support may come from the $37.00 level, which is where we may see a bullish ABCD pattern form.
The trade: Sell US Oil at $52.30 with a stop loss at $54.30 and a take profit at $48.30. The Risk/Reward Ratio is almost 1:2
Edward J. Moya
WorldWideMarkets Online Trading