Oil prices initially rallied in NY after OPEC support for continuing their supply cut agreement into second half of year is reportedly increasing. They also noted that they would require non-OPEC participation to extend agreement. The markets ignored the prospect of a possible extension of supply cuts as concerns remain strong on growing US oil output and high inventories.
Price action on the US oil daily chart shows that the bearish ABCD pattern that formed on Jan 3rd remains valid. Currently price is tentatively respecting the 200-day SMA. If the bearish reversal resumes, key support may come from the $46.50 region, which comes from the longer-term trend line that started with the $35.24 low. The medium term outlook could see oil maintain $45.00 to $55.00 trading range. If we see bullish momentum recapture the psychological $50.00 level, further resistance may target the $52.25 level.
If the downward pressure accelerates, major support will come from psychological $40.00 level.
The trade: Buy US oil at $46.50, with a stop loss at $45.50 and take profit at $49.50. The risk/reward ratio is 1:3