Oil prices in February are in the midst of a strong rebound and partial recovery despite the massive drop in number of US oil rigs. Baker Hughes announced on Friday that drillers dropped the rig count by 98 rigs to 1,358. This trend of idling rig counts has lost over 100,000 oil jobs and if it continues, we could finally see production fall.
Price action on the oil daily chart shows that the seven month slide appears to be stabilizing after making a near six-year low at $43.58. Currently price is respecting a potential triple-top pattern around the $54.00 zone.
If bullishness continues, we may not see major resistance until price forms a bearish butterfly pattern around the $58.50 area. That noted level is also the 23.6% Fibonacci retracement of the recent seven month slide.
The trade: Sell Oil at $58.50 with a stop loss at $60.50 and a take profit at $52.50. The Risk/Reward Ratio is 1: 3
Edward J. Moya
WorldWideMarkets Online Trading