Oil prices rose around 0.5% in thin trading as Indonesia, Singapore, Malaysia, India and the Philippines were closed to observe the end of Ramadan. Last week saw oil prices fall to a 10-month low before rebounding at the end of the week.
On Friday, the weekly Baker Hughes report showed oil and natural gas producers posted their 23rd consecutive week of US rig additions. The rig count climbed 0.8% to 941 rigs.
Price action on the US oil daily chart shows that in early May key support came from a bullish ABCD pattern. Point D was confirmed with the 141.4% Fibonacci expansion level of the B to C move. Price is now tentatively trading around both the 200- and 50-day SMA(s). Price was unable to rise above the $52 level and has since fallen back below all three key SMA(s). Last week’s slide saw the key respect of the $42.00 handle. The current 3-day rally is respecting the $43.50 level. If see a return of bearish momentum, further pressure could target the $39.50 to 40.00 zone. Major resistance would come from the 50-day SMA, which currently trades at the 47.72 level.
The trade: Sell US oil at $46.75, with a stop loss at $47.75 and take profit at $43.75 The risk/reward ratio is 1:3