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Today’s Trading Edge: Oil rebounds from double bottom to a double top pattern

Posted by Edward Moya on Feb 9, 2015 9:25:00 PM

WWM US OIL FEB 9 2015

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

Technical Strategist

WorldWideMarkets Online Trading

 

Topics: Crude, crude oil, $OIL, oil price

 

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