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Today’s Trading Edge: Oil started the trading week soft on oversupply concerns and falling shale production forecasts

Posted by WorldWideMarkets . on Oct 17, 2016 8:54:05 PM


Oil prices tentatively fell below the $50.00 handle to start the trading week, but has since risen back towards the $50.60 level. Earlier in NY, the EIA monthly report showed that total US shale regions oil production forecast to decline 30K bpd m/m to 4.43 million barrels per day in November.  Nigeria and Iran also stated various production target goals that weighed on the oversupply concerns. 

Oil prices continue to remain above $47.45 level, which was the September 28th high that occurred when OPEC agreed to drop production to a range of 32.5-33.0M barrels per day after the third day of meetings.  Most analysts expected no deal to be reached.  Stocks and oil related currencies rallied following the news. 

Price action on the US oil daily chart shows that the bullish rally surged above the 100-day SMA, but has continued to respect the summer high of $51.67 made on June 9th.  Price has consolidated over the past two 10-days and is trading between the $49.30 and $51.60 zone.  Currently price has tentatively formed a bearish ABCD pattern, but the corrective move lower has stalled thus far. If we see price continue to fall and break above the $48.00 level, key support may come from the 200-day SMA, which trades around the $42.22 level. 

If the bullish move returns, major resistance will come from the $53.30 level, with further longer-term upside targets remaining the $60.00 handle. 

The trade: Buy US oil at $48.00, with a stop loss at $47.00 and take profit at $51.00.  The risk/reward ratio is 1:3

Topics: US Oil, crude oil, West Texas Intermediate crude oil, $OIL, oil price


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